Of­fTheBeat Make The Black Money Dis­clo­sure Plan Re­al­is­tic

The Economic Times - - Money - SU­GATA GHOSH

In a few weeks, we will fig­ure out how New Delhi goes about han­dling the black money dis­clo­sure scheme — whether it is se­ri­ous and prag­matic or sim­ply rhetor­i­cal and dis­in­ter­ested; whether the rules it frames en­cour­age the rich to come clean or shy them away. Last year’s quasi amnesty win­dow for dec­la­ra­tion of for­eign as­sets was a flop. Thanks to un­re­al­is­tic rules — such as sub­mis­sion of bank ac­count state­ment since the day the ac­count was opened — as­sets worth less than ₹ 4,500 crore were de­clared. But if sold well, the lo­cal black money scheme can gen­er­ate ten times that amount.

No one is sure whether the fi­nance min­istry has learnt from the ex­pe­ri­ence of 2015. But chances are that once the Fi­nance Bill is passed, fi­nance min­istry of­fi­cials (per­haps led by ju­nior min­is­ter Jayant Sinha) would hold a frank chat with se­nior tax pro­fes­sion­als and bankers to come out with rules that are agree­able as well as po­lit­i­cally ac­cept­able. The suc­cess of the 1997 vol­un­tary dis­clo­sure scheme, which led to a dec­la­ra­tion of more than ₹ 33,000 crore (and re­sulted in tax col­lec­tion of around ₹ 9,500 crore), was partly at­trib­uted to sug­ges­tions from pro­fes­sion­als. Shortly be­fore the scheme was closed, the min­istry an­nounced that the amnesty would ex­tend to in­di­rect taxes — a move that em­bold­ened more peo­ple to de­clare. Typ­i­cally, a firm fac­ing a fresh tax claim from the I-T de­part­ment re­ceives sim­i­lar notices from in­di­rect tax au­thor­i­ties like ex­cise and cus­toms of­fices — a rea­son why part­ner­ships, firms and busi­ness en­ti­ties would be look­ing for some as­sur­ance that their dec­la­ra­tions in this year’s scheme would not trig­ger notices from the ex­cise de­part­ment.

But the tax of­fice is likely to pre­fer its usual style of beat­ing the drum to mar­ket the scheme — by in­ten­si­fy­ing raids and searches to put the fear of God into peo­ple and nudge them to cough up more tax. But this may not gen­er­ate the best re­sult be­cause the sit­u­a­tion is more com­pli­cated this time around.

Hav­ing missed the op­por­tu­nity (to de­clare their hid­den for­eign as­sets) in 2015, hun­dreds who have il­le­gal for­eign bank ac­counts or are ben­e­fi­cia­ries of off­shore trusts would look ways to avail the lo­cal black money scheme. Since banking chan­nels can­not be used (for this year’s scheme) to bring back money from abroad, they will, un­der­stand­ably, hire ser­vices of hawala op­er­a­tors or take some other un­of­fi­cial route to get the cash back. Tax of­fi­cers stum­bling on such cash piles (in the course of their mar­ket­ing drive to scare peo­ple into dec­la­ra­tion) would only com­pli­cate mat­ters: those caught with the cash (but hav­ing the in­ten­tion to de­clare) would be dragged over the coals and this make most hold back the money and crawl back into their shells.

It would be wiser if tax of­fices min­imise searches and re­frain from co­er­cive ac­tions from June to Septem­ber when the win­dow for declar­ing lo­cal black money would be open. In the time be­tween a per­son up­load­ing the form to de­clare undis­closed wealth and till he re­ceives the green sig­nal from the tax de­part­ment, he should not come un­der the glare of the as­sess­ing of­fi­cer. Even if he doesn’t up­load the form — pos­si­bly be­cause he is yet to make up his mind — it may make sense for the tax of­fice to keep off for a few months. It would not only help the gov­ern­ment raise more tax than it had pos­si­bly ex­pected but also en­sure that the de­bate on black money is more than an empty po­lit­i­cal slo­gan. The re­cent Panama Papers leaks, ear­lier notices and pros­e­cu­tions based on in­for­ma­tion on undis­closed as­sets in Liecht­en­stein, HSBC Geneva and British Vir­gin Is­lands have rat­tled many. How­ever, tor­tu­ous court cases and oc­ca­sional tri­bunal rul­ings in favour of as­sessee have hard­ened those who be­lieve they can still get away. Thus, a cau­tious, hard-boiled ap­proach could spring pos­i­tive sur­prises. If, de­spite crit­i­cism and po­lit­i­cal op­po­si­tion, the gov­ern­ment could come out with a black money dis­clo­sure scheme, it should make it work­able. At the end of the day, amnesty or semi-amnesty schemes are just func­tions of po­lit­i­cal ex­pe­di­ency and de­plet­ing state cof­fers. The eth­i­cal line, if there was ever one, is ei­ther blurred or has long been crossed.

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