The governments white paper on black money,tabled by Finance Minister Pranab Mukherjee in the Lok Sabha on Monday,specifically mentions sectors such as real estate,bullion and jewellery market and the financial markets as most vulnerable to the menace of illicit money flows. However,it stops short of pegging a precise estimate of the black money floating around.
To tackle the menace,the 108-page paper suggests deducting tax at source on all real estate deals and making it a pre-condition to register a property. The paper,which broadly outlines the governments plan of action on black money,also makes a case for a possible one-time voluntary disclosure of income scheme for funds stashed abroad.
The table deals with avenues of black money generation and lists steps taken by the government to curb the same flowing into the economy. Stressing on the need to set up lokpals and lokayuktas to speed up investigation in corruption cases,the paper also calls for implementing the Goods and Services Tax.
The closest that the document comes to giving a figure on the illegal wealth abroad is a reference to estimates made by the International Monetary Fund (IMF) and Global Financial Integrity (GFI),a non-government organisation that campaigns against illicit global financial flows.
While an IMF study estimated the flight of capital from India during 1971-97 at $88 billion,GFI,in its 2010 report,put the total illicit outflows from India at $213.2 billion. One of the most interesting figures in the report is the officially disclosed estimate of Indian accounts held with Swiss banks,which is said to be down 60 per cent between 2006 and 2010.
By August,a study group comprising three think tanks mandated by the Finance Ministry to estimate the quantum of black money in the economy,is expected to submit its report.
Focusing on real estate,which accounts for 11 per cent of the GDP,the white paper says that apart from improving the data base of immovable properties,one of the measures… could be the provision of deducting tax at source on payments made on real estate transactions and mandating it as a pre-condition for registering of the transacted property.
It adds that provision for tax collected at source on the developer of the property may also be an option. While reporting and monitoring of the bullion and jewellery sector should be revamped,the paper says,the customs and income tax act may also be amended to check such transactions. Currently,under the Income Tax Act,it is mandatory to furnish the PAN number to purchase bullion above Rs 5 lakh.
Regarding black money stashed in foreign bank accounts,the paper says the government may consider a Voluntary Disclosure of Income Scheme,on the lines of the mechanism adopted by developed countries like the US,UK,France and Germany. A similar scheme can be a one-time option,in view of the increasing capacity of the tax administration to access information from foreign jurisdiction, the paper said.
Stressing on the need to have adequate audit trail for transactions,the paper suggests promotion of banking channels credit and debit cards through Indian e-service intermediaries like RuPay. Apart from making it compulsory for the private sector to pay salaries through the banking channels,the government can also deliberate providing tax incentives for use of credit/debit cards as practised in Republic of Korea. In case of cash purchases,a provision for collection of tax at source at a low level may also be considered by the government,the paper said.
The government should also prepare a database of not for profit organisations and cooperative societies so that their activities can be monitored,the paper says.