Five ways Indians are dodging ‘black money’ crackdown
FROM deploying “cash coolies” to buying Rolex watches, Indians have found unique ways to dodge the government’s move to withdraw highvalue bills in a bid to tackle widespread corruption and tax evasion.
Prime Minister Narendra Modi sent shockwaves through the country by announcing on November 8 all 500 rupee (US$7.30) and 1000 rupee notes – some 85 percent of all bills in circulation – would cease to be legal tender within hours.
The announcement threw India’s cash dependent economy into turmoil and triggered a mad rush among people with undeclared, unaccounted cash – so-called “black money” – to exchange old notes or use them to buy gold and luxury items.
Tax evasion is rife in India with many businesses and professionals such as doctors and lawyers asking to be paid in cash to avoid taxes.
Only six people earning over 500 million rupees filed returns in 201213, despite there being an estimated 2100 ultra-wealthy Indians whose net worth exceeds $50 million.
But the government is cracking down and banks must report anybody depositing more than 250,000 rupees, while holding undeclared cash can lead to a penalty of double the tax owed.
There have been multiple reports of factory owners and businessmen asking staff – or even hiring casual labourers – to stand in bank queues and exchange cash for them before the December 30 deadline.
The initial over-the-counter currency exchange limit was 4000 rupees but was later reduced to 2000 after the government said “unscrupulous elements” were paying the poor to queue to exchange their money.
The government also asked banks to ink people’s fingers – a tactic normally used to fight voter fraud – after they had exchanged bills to prevent them from queueing up again.
Wealthy Indians rushed to make costly purchases with unaccounted cash soon after the announcement.
Several luxury retailers stocking brands like Rolex and Dior sent emails to clients stating their stores would be open until midnight that day, the Economic Times reported.
Some affluent buyers have reportedly been paying almost twice the market value for gold in old notes.
Jewellers who had shut up shop for the day on November 8 reopened their stores within hours and were selling gold all night.
Customers lined up outside jewellery stores in Delhi and Mumbai with bags of cash with one report saying they paid as much as 52,000 rupees ($762) per 10 grams of gold, almost double the going rate.
In a sign of how desperate some Indians were to convert cash, a massive spike was seen in the number of railway ticket bookings after authorities said old bills could be used until midnight on November 11 to make reservations.
Most of these were advance bookings made using old notes.
Bookings can be cancelled at a later date with refunds paid out in new notes with only a small fee deducted.
A man poses with replica prints of the demonetised 500 and 1000 rupee notes as part of a street art exhibition in Mumbai on November 20.