It is hardly surprising that the government has ended up mobilising only Rs 3,770 crore through a one-time compliance window for disclosing black money or undeclared assets overseas as part of the new law aimed at unearthing black money. With no amnesty on offer this time, few expected those who had stashed money abroad to declare their assets and pay the penalty and tax, which works out to 60 per cent, given the fears of their cases being re-opened and prosecution, even though the government had promised that information filed under this special window would remain confidential.
In 1997, the government raised Rs 10,000 crore through the highly successful Voluntary Disclosure of Income Scheme, which was applicable for undisclosed domestic income or assets, but was forced to commit to the Supreme Court that there wouldn’t be any more amnesty schemes. Having pitched the issue of black money in the 2014 national polls and with the prime minister promising to bring back undeclared wealth or income held abroad, the government may have had little choice but to go ahead with a scheme like this.
But a crackdown on black money will have to extend way beyond schemes like the latest one. That would mean striking at the root of this evil, such as in the form of false invoicing of imports and exports, benami and real estate transactions in India.
India’s political parties have for long fuelled this by offering cash, for instance, to influence voters and appear to be loath to bring any change that would ensure state-funded polls. Having said that, there is much the government can do. Pushing the GST can help plug some of the avenues for generating black money, while greater monitoring
of export-import trade and the setting up of a dedicated unit, along the lines of the Trade Transparency Unit in the US, to check the mismatch between the country’s export-import data and that of other nations — a recommendation made by the Special Investigation Team constituted by the Supreme Court — will certainly help.
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Despite having recognised that real estate in India is a major source of the generation of black money, there has
been a great reluctance to bring this sector under regulatory watch. Korea has been successful in some ways in fighting this by mandating that more transactions be carried out electronically. India, too, should move towards laying down a medium-term roadmap as Aadhaar-linked schemes gain traction and more people become part of
the formal banking system.
Most importantly, to succeed in this battle, governance reforms and an easing of the path for entrepreneurs and businesses will be key.
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