Withdrawal symptoms

If I were to punch in Rs 10,500 or Rs 10,700, the back-end calculators would go crazy, and have to dispense even more, smaller denomination notes.

Banks will have to rejig their ATMs. At some stage, they8217;ll pass on the cost.

I can live with that too, if indeed it helped good Mr Chidambaram ferret out black money. This tax on cash flow, it is heard, is the brainchild of a finance ministry official. He discovered a similar measure in Brazil.

All well and good, but I wonder if Mr Chidambaram and his Blame-it-on-Rio wunderkind have ever tried buying a house, even a humble DDA flat, in Delhi. Over the past year, my wife and I have been trying. We haven8217;t found one that we both like and can afford 8212; and no, I obviously can8217;t blame the finance minister for that!

Yet, in the process, we8217;ve learnt a fair bit about the property transaction system in the capital. It legitimises black money deals, even incorporates them into mainstream banking practices. Mr Chidambaram and his withdrawal tax go after the symptom, leaving the disease unchecked.

TODAY, a person whose only earnings are through a monthly cheque can get on without interacting with the black money economy at all. The Indian stock markets have been cleaned up. If I want to buy shares or mutual fund units, I issue a cheque, give my PAN number, verify the antecedents of my money. Why, I can even pay my cable operator by cheque, buy groceries by credit card.

That leaves one final frontier 8212; property. If I want to buy a flat, chances are the seller would want half sometimes 60-65 per cent the payment in cash. This will save him capital gains tax.

It will also save me, as property dealers have helpfully pointed out, stamp duty 8212; the fee paid to the government that is a percentage of the registered value of the property.

What if you have no cash/black money lying around and are actually looking to a house loan? No problem, the system fixes it for you. There8217;s a neat little trick in operation that even banks wink at.

LET8217;S say I want to buy a flat worth Rs 50 lakh. The seller demands 8216;8216;50 per cent in black8217;8217;: he8217;ll accept only

Rs 25 lakh by cheque. A bank will usually finance 85 per cent of this. This means the bank will issue the seller a cheque of Rs 21.25 lakh. I have to top it up with a cheque of Rs 3.75 lakh. So far so good.

Now comes the dirty part: the Rs 25 lakh in cash. The bank is allowed to supplement my loan with a 8216;8216;fittings and fixtures8217;8217; or 8216;8216;home improvement8217;8217; loan of upto 90 per cent of the registered value of the property.

This means, it can give me Rs 22.5 lakh 8212; being 90 per cent of Rs 25 lakh 8212; towards vague 8216;8216;fittings and fixtures8217;8217;. This cheque is issued in my name. I am required to withdraw the Rs 22.5 lakh in cash from my bank, put it into a briefcase and hand it over to the seller. He can then use the money to buy vegetables or, more likely, property elsewhere, and keep the chain going.

This is where the withdrawal tax comes in: 0.1 per cent of

Rs 22.5 lakh comes to Rs 2,250. How will the finance minister use this? Maybe he8217;ll hire a detective to follow me while I take the briefcase to the property agent8217;s office. He could ask me questions, yes, but that8217;ll again amount to attacking the cog, not the wheel.

WHO8217;S the big loser in all this? To some degree, I am. Not only do I now pay

Rs 2,250 extra 8212; admittedly, small change if I8217;m buying property worth much more 8212; but I8217;m being asked to convert my white money into black! After all, I8217;ll be paying the bank its EMIs by cheque.

The larger loser is the government. It is being shortchanged, paid half the official stamp duty. The biggest loser is society, so inured to circumvention that even banks help you push good money into a bad, black hole.

Is the withdrawal tax going to change any of this? I don8217;t think so.

Wouldn8217;t cleaning up the property market be a better idea?

Lower stamp duties across states could lead to, hopefully, greater compliance. Kolkata has introduced a floor value, fixed according to neighbourhood and size of property. As such, a buyer can8217;t escape paying a minimum but realistic stamp duty. The Municipal Corporation of Delhi now says it has similar plans.

Solutions come later. For a start, does the finance minister have estimates as to what proportion of the parallel economy is invested in property? Maybe he could use the withdrawal tax to bankroll that survey.

As for me, I8217;m waiting for the magical house, and that mystical 8216;8216;all-cheque8217;8217; deal.