Updated: May 15, 2015 12:00:31 am
The government has finally managed to ensure the passage of important legislation, including the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Bill, 2015, fulfilling its promise to curb tax evasion and discourage money laundering. It also introduced the Benami Transaction (Prohibition) Bill in the Lok Sabha, aimed at checking domestic black money. The two bills provide for stiff jail terms for failure to disclose assets, punishment for every person responsible to a company for any offence and a monetary penalty of up to 25 per cent of the market value of the property. The tough new law may have unnerved some sections of industry, which fears that this could be a tool for harassment by taxmen. To allay concerns, Finance Minister Arun Jaitley said the government would offer a compliance window of a few months to come clean — sort of an amnesty.
The new law, passed on the eve of the NDA’s one-year anniversary, may win the government political points, blunting criticism that it has not moved meaningfully on black money and corruption. But it cannot discount fears, voiced by certain lawmakers, among others, on potential misuse of the law. In a way, it reflects a mindset where a person is, prima facie, assumed to be guilty. Much of the unease has to do with the administration’s record on dealing with taxation and money laundering, and the experience of taxpayers, notably the recent tax demands on past investments of foreign funds. All this from a government that had Indian industry rooting for it after promising to put an end to “tax terrorism”. The government must recognise that, globally, efforts to counter evasion are centred on robust information gathering and exchange based on extensive use of technology, not through raids and fishing expeditions. Recent attempts at recovering illegal funds stashed abroad should also have convinced the government of the enormity of the challenge on the black money front.
These laws may be a deterrent but a durable solution could lie in the form of the GST, which will subsume many other taxes and help change the way the real estate industry operates, by providing a set-off on transactions and stamp duty only on the value added part. That and a reform of political funding in India are what the government should expend its energies on.
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