HYDERABAD, December 27: Schemes like the Voluntary Disclosure of Income Scheme (VDIS-'97) - which is due to close in the next few days - may not necessarily be a solution to the black money problem confronting the country, according to noted economist Raja J Chelliah, the winner of this year's Financial Express Award for Economics.In the past, one thought there would be less black money if there was a lower level of taxation. But the very nature of the black money generated in the country has negated the effort, Chelliah said.Speaking after the presentation of the award at the 80th annual conference of the Indian Economic Association, he observed that one of the flaws in the voluntary disclosure schemes was that politicians and bureaucrats could not declare their ill-gotten wealth. Once they did, they would fall within the ambit of the Prevention of Corruption Act, which would not be acceptable to them."However, this particular scheme (VDIS-'97), by virtue of being more liberal, may bring in more money than previous attempts. If that is the only objective, then it is all right. But, I think that is not the right policy," said Chelliah. "If you are confident that substantial amounts of black money can be taken away through such schemes, then one can overlook the moral aspects as you are doing good for the country. But that is not going to happen," he emphasised. Though tax rates have been brought down to a great extent, other taxes like stamp duty and property tax have to be brought down further. The nature of society is that a lot of income is generated through illegal activities and those cannot come out in the open even at a five per cent rate of tax."So the long-term solution is in rationalising the taxation system further by reducing excise duty and sales tax and improving tax administration," said Chelliah, who was chairman of the tax reforms committee. According to him, though the amount of black money generated can be brought down, one cannot get rid of it altogether. "No country has done so. It has to be brought down to acceptable levels. It cannot be allowed to take over the economy," he added.While Chelliah is, in general, satisfied with the centre's progress on the tax front, except for the tax administration part, he feels much remains to be done by the state governments. "We are trying to get the states to rationalise their taxation systems. But not all of them are agreeable," he said.On implementation of a uniform VAT he said the NIPFP would chart out a model VAT law in six months. Talking of the centre's move - reducing capital expenditure to contain the fiscal deficit even while increasing current expenditure - Chelliah felt the trend could be reversed if there was political will. Much would also depend on what the eleventh finance commission will do, he said.As for sharing of revenues between centre and states, Chelliah felt the percentage for devolution should be fixed for a period of 15 to 20 years and should not be bargained time and again.
