Five ways In­di­ans are dodg­ing ‘black money’ crack­down

The Myanmar Times - - Business -

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.

Photo: AFP

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.

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