Not so exotic

The BJP highlighted the problem but distracted attention from the likelihood that Indians stash most of their black money right here at home. India’s fast-growing economy is a more attractive destination than the moribund and volatile western markets. Tax havens have been less attractive since 2009,when the G-20 ganged up on them. The big powers agreed that havens compromise tax collections of all nations and Switzerland,Liechtenstein,Luxembourg and Monaco agreed to dilute the anonymity of bank depositors in the interest of transparency. While estimates of Indian black money vary so drastically as to be unreliable,it is certain that more than ever before,unaccounted funds are likely to be parked at home. Mukherjee has shifted the focus of the future enforcement regime away from funds secreted overseas — to real estate and gold.

But a change of policy attitude must accompany the change of focus. Taxation has become a game of cat and mouse between taxpayer and government. Tax is seen as extortion,not a legitimate price to be paid for public services and nation-building. Perhaps it’s because services short-change users and taxpayers feel alienated from the blueprint for national development. The finance ministry has now identified real estate and gold as the biggest sink-holes for black money. It has also cast the evasion net wider by mentioning market manipulation,corruption and organised crime in the white paper. But it is still to shift the emphasis from enforcement to compliance by developing a tax regime that is not seen to be extortionate. A lot of black money is generated by law-abiding citizens engaged in legitimate activities who do not reveal their income. They must be encouraged — rather than forced — to do so.