Demonetisation: 10 sustainable steps to cleanse India of black money

We could have achieved the purpose set out for demonetisation with far lesser cost, lesser pain albeit with greater effort.

Updated: December 9, 2016 3:54 pm
demonetisation, demonetisation deposit, money exchange, PAN card for deposits, demonetisation crisis, india news Senior citizens queue up outside a bank in Mumbai Saturday. Express Photo/Dilip Kagda

By Mahesh Peri

The term ‘Black Money’ is an oxymoron. The fact that about Rs 12 lakh crore of the Rs 15.44 lakh crore demonetised currency is already with banks makes it more so. The steps I suggest here for cleansing Indian economy take time, don’t provide bragging rights and don’t result in shock and awe. They won’t make you look a hero. But they still need to be done. They are sustainable and have a far greater impact in the longer term.

Thankfully, the goal post for demonetisation now is also shifted to ‘long-term impact’. And they impact at the grassroots level. And these are the things I would do to the 0.01 per cent people to ensure that 99.99 per cent are not made to suffer.

WATCH | One Month Of Demonetisation: Where Do Things Stand

1. Make political funding only through cheque. BJP should take the lead. Bring political parties under RTI. As political donations are 100 per cent tax deductible, all of us would only be happy.

2. The biggest and the largest cases of money laundering stop at the gates of enforcement directorate than with the courts. Follow up every ED case of money laundering, release assets that could be seized and monetised for the country. Appoint fast track courts to settle them in a time bound manner.

3. The declared total NPAs of all banks are – 60,00,00,00,00,000 (6 lakh crores). If you are to add the stressed loans that have escaped provisions because of window dressing, this would jump to Rs 16-18 lakh crore. Attack them with all your might. Ensure tougher laws against wilful defaulters. Revisit the Sarfaresi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002). Tighten the judicial system to ensure that no one escapes. I am not talking of genuine business closures, please!

4. One data point suggests that at least 100 MPs are wilful defaulters to banks or have demanded a Corporate Debt Restructuring package (CDR). Set a higher stand of transparency to lawmakers – MLAs, MPs, chairpersons of government boards. A conduct certificate is necessary for all of us to get a government job, right? Any lawmaker who has ever gone through a CDR package or been a defaulter should be automatically barred.

5. According to a 2014 report by the government, about Rs 4,50,000 crore of taxes are stuck in disputes. As per another 2016 data, there are 73,402 appeals with tax effect above Rs 10 lakh and 1,85,858 appeals with tax effect below Rs 10 lakh pending before CIT (Appeals) across the country. Resolve them. Settle them. Collect the taxes.

WATCH VIDEO |  Congress Vice President Rahul Gandhi Warns Government: Here’s What He Said

6. The tax disputes in the case of indirect taxes would be a multiple of that. The sales tax, octroi, customers and excise cases, if settled, would result in a windfall to every state government.

7. Make every transaction above Rs 50,000 only through banking channels. Reduce liquidity, albeit gradually. Ensure that all companies pay only by cheque.

8. Make Long Term Capital Gains Tax (LTCG) on real estate to 5 per cent and stamp duty to another 5 per cent. In fact, investments in stock markets are taxed (LTCG) at 0 per cent. This will ensure people will declare the right value. It helps everyone. The current capital gain rate of 30 per cent encourages under invoicing.

9. Ensure that all customs duty on gold is abolished. This will ensure that the difference between smuggled gold and that already in India is minimal.

10. This is most important. Corruption robs the most amount of money meant for the nation. Transparency International estimates that just truckers pay annually ?222 billion (US$3.3 billion) in bribes. Government regulators and police share in bribe money, each to the tune of 43 per cent and 45 per cent respectively. Corruption would be costing us any where between Rs 6 lakh crore to Rs 10 lakh crore. And this government hasn’t attacked it with the seriousness it deserves. The big worry of traders and small businesses is the harassment from tax authorities once they enter the tax net. Stop corruption and deal with corrupt officers with an iron hand. In the last two years, corruption in bureaucracy is not down, but up. We need to ensure the arbitrariness of tax authorities is minimal and discretions are to a zero. People must feel comfortable and happy paying tax, not scared and worried of future harassment.

We could have achieved the purpose set out for demonetisation with far lesser cost, lesser pain albeit with greater effort. We should have attacked money launderers, NPAs, wilful defaulters, settled tax cases and worked on reducing corruption. Instead, we preferred the easy way out and made the country stand in queue with ‘hope’ dangled at the teller machine.

Mahesh Peri is Founder & Chairman, CAREERS 360. He is a qualified CA, CMA and ACS. Views expressed are personal.

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  1. S
    Suresh Deshpande
    Feb 15, 2017 at 6:53 am
    These aspects should have been implemented with honesty and determination!
    Reply
    1. N
      Nixon Augustin
      Dec 8, 2016 at 6:53 am
      As two and half years over, Modi has nothing to substantiate the walk the talk. he was forced to do something dramatic to keep his fake image high
      Reply
      1. A
        Arun Sharma
        Dec 8, 2016 at 9:39 am
        LITIGATION WILL ALWAYS HAPPEN. EVEN FAST TRACK COURT CANNOT WIPE THEM OUT. REDUCING TAX RATE AND EXEMPTIONS CAN REDUCE THEM.lt;br/gt;OPEN BANK ACCOUNTS FOR ALL USING ADHAAR CARD AND FORCE THEM TO MAKE MONEY TRANSACTIONS ELECTRONICALLY/BY MOBILE. FOR THIS COVER W NATION WITH HIGH SPEED INTERNET.
        Reply
        1. B
          Binay
          Dec 8, 2016 at 8:29 am
          Really very good suggestion! But will the governments follow these?
          Reply
          1. D
            Datta
            Dec 8, 2016 at 6:44 am
            There are way too many people in this country who do not pay taxes, who pay bribes to get one or the other benefit but want corruption to end. These people are traders, small businessmen, govt servants (of all ranks), small contractors (specially pwd/irrigation) and real estate agents. Are these people poor? No way. But their intentions from word go are wrong. And politicians only add to this chaos. We need to find technological answers. We cannot rely on income tax babus or finance ministry babus. Manual intereference and discretion has to end. I think demonetisation has shaken the system and moved it towards digitisation. We need more of these shocks.
            Reply
            1. S
              Sreenivasan
              Dec 8, 2016 at 7:30 am
              Good. All the ten points are apt. If implemented with honesty government will become a hero of the people when the results are delivered to them. But with the present set up, particularly the major element in the ruling alliance itself Is a corrupt party which leaned heavily on black money for previous electoral wins and to build up party organization how we can expect them to take up such foolproof jobs in hand ? They will be interested only in gimmicks like Demonetisation. How to win elections without disturbing black money is the actual question they ask. In such a scenario and as far as the big corporates are comfortable with black money, major political parties like Congress, BJP etc. will not show courage to attack it. It will take a real communist to do the job. Now after Fidel Castro, is there any communist in the world?
              Reply
              1. E
                erpsandeep
                Dec 28, 2016 at 5:42 am
                Modi.........Such a Great
                Reply
                1. E
                  erpsandeep
                  Dec 28, 2016 at 5:41 am
                  Modi...Such a great
                  Reply
                  1. G
                    gc
                    Dec 8, 2016 at 9:34 am
                    Also,money returned to the banks has not become 'white' just because it has been deposited. Money that has will return to the banks e.g14 LCr,the part of that money that will become taxable but wasn't taxed before is also the black money unearthed (say 1 lakh crore under previous VDS, current DS and otherwise),add to that money that will not return, and counterfeit currency, this all adds to over 2 Lakh Cr which is huge amount.That is only ONE ECONOMIC argument. The ONLY MONEY AFTER THIS SCHEME WHICH WAS BLACK BEFORE AND WILL REMAIN BLACK AFTER this exercise IS THE BLACK MONEY (ONLY A PART OF ALL DEPOSITS) PEOPLE HAVE DEPOSITED AS UNDER 2.5 LAKHS DEPOSIT OR HAVE EXCHANGED.That is very small amount, maybe just 5% of total. Therfore this scheme has been able to unearth 95% of black money, a huge success,even without counting ither and future gains.
                    Reply
                    1. G
                      gc
                      Dec 8, 2016 at 9:36 am
                      The ONLY MONEY AFTER THIS SCHEME WHICH WAS BLACK BEFORE (Untaxed) AND WILL REMAIN BLACK AFTER this exercise IS THE BLACK MONEY PEOPLE HAVE DEPOSITED AS UNDER 2.5 LAKHS DEPOSIT OR HAVE EXCHANGED AT THE COUNTER (some part ).That is very small amount, maybe just 5% of total. Therefore this scheme has been able to unearth 95% of black money, a huge success,even without counting other and future gains.
                      Reply
                      1. G
                        gc
                        Dec 8, 2016 at 9:17 am
                        Very good suggestions.However, the author views the current exercise only through economic view, and thereby fails in appreciating the behavioral,social and moral impact of this exercise. Indians had become so much accustomed to tax evasion,chalta hai atude and having indifference to the nation that this notebandi was essential.This is just a start.For sure,there will be many steps ahead and some of which the author has already discussed would already be in government's plan.
                        Reply
                        1. A
                          A. Khan
                          Dec 8, 2016 at 11:43 am
                          "Digitalisation can't bridge the ridge...." of hurdles that exists at every nook and cranny of the black specks on the countenance of the Indian economy and Demonetisation is not mature enough to combat the customary methology ,that bigshots with extensive reach are used to tackle with.lt;br/gt;lt;br/gt;THE QUESTION THAT BLudgeons us is that was it a hasty decision that came to the fore without adequates arrangements so as to ensure that public convenience is prioritized much above those castles of ideologies carved out of fantasy .lt;br/gt; Why is the innocent and silent sufferer all the time the poorer?albeit no remarkable benefit is derived by them.lt;br/gt;Its simply curbing one's right to peaceful existance for the sake of extending support, even by bearing and enduring ceaseless hardships, towards one's political agenda or basicaly bending down before 'his' idiosyncracy even though it might not be acceptible .lt;br/gt;lt;br/gt;We aRE GOING THROUGH A STAGE OF PROBLEMATIC ANARCHY !
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                            A. Khan
                            Dec 8, 2016 at 11:45 am
                            A. DEMONETIZATION IS JUNK AND UNYIELDING.
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                            1. M
                              mani
                              Dec 15, 2016 at 4:42 pm
                              as citizens we expect opposition and political parties to perform some very important roles in governance.one of the most important aspects we expect from the opposition parties is this - whether you have supported or opposed a policy while it is being debated, during its implementation, you cannot close your eyes and even go to the extent of even actively facilitating criminals who indulge in illegal activities to prevent successful implementation. having supported or opposed it prior to its implementation, it is the bounden duty of the government bodies at all levels ( Central, state, district etc) to do their best to ensure most efficient implementation. In the current context, it is sad to see a lack of will on the part of some of the states in taking to task criminal elements trying to convert their black money through all illegal means. How sad. they seem to be working very hard to make sure that the remonetisation does not succeed. Do they not want their country to progress? is their only aim to prevent any government policy succeed?
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                              1. J
                                jew
                                Dec 8, 2016 at 5:31 am
                                Take it from me, none of this will be done. Why?lt;br/gt;Because all of them make sense but hurt BJP.
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                                1. M
                                  Manzoor
                                  Dec 8, 2016 at 7:20 am
                                  But who (which party) is going to bell the cat.
                                  Reply
                                  1. M
                                    Manzoor
                                    Dec 8, 2016 at 7:20 am
                                    But who (which party) is going to bell the cat.
                                    Reply
                                    1. M
                                      murtyvonna
                                      Dec 8, 2016 at 5:32 am
                                      If the suggestions are implemented there will be hundred percent success and rid the country from financial crisis. The question is will the Government do it? Mr Narendra Modi's Government will fall the day it is implemented. Mr Modi will be left alone.
                                      Reply
                                      1. P
                                        Pijus+Kanti Bhuin
                                        Dec 16, 2016 at 2:24 pm
                                        Brilliant!
                                        Reply
                                        1. R
                                          Rajan
                                          Dec 8, 2016 at 6:17 am
                                          Logical steps listed and sensible comments so far...lt;br/gt;But reality is that over a period of time we tend to show our true colours and intentions...lt;br/gt;We all know that ITS JUST NOT HAPPENING...lt;br/gt;lt;br/gt;Sad, but true. We live on hopes, we die on them. That's stark reality.
                                          Reply
                                          1. V
                                            Vishwas
                                            Dec 8, 2016 at 7:36 am
                                            Make Gold/Silver purchase and cash less... i.e. only with Cq/DD/Net banking / Debit-Credit card. Ban to gold in the form of Coin, Chips, biscuits. Make compulsory PAN or Aadhar card for gold / silver purchase. this will help to stop going of black money in gold currency.
                                            Reply
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