OffTheBeat Make The Black Money Disclosure Plan Realistic
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.