Modi’s hunt for assets goes down to the wire

NEW DELHI: Income tax officers in India were burning the midnight oil last night. With a four-month window to declare undisclosed assets ending this month, Prime Minister Narendra Modi has asked officials to work into the night to handle a last-minute rush of declarations.

Black money, a colloquial term for income that has illegally escaped taxes, has been a hot political issue in India — Ambit Capital has estimated the country’s black economy at 30 trillion rupees (about 15 trillion baht).

Mr Modi struck a chord with 1.3 billion Indians in the 2014 national polls by promising to give the impoverished as much as 2 million rupees each from such funds stashed abroad. A one-time chance to come clean on the foreign funds led to declarations of only about 25 billion rupees in tax last year, and the programme for local cash ending this month might not be much different.

“What is probably stopping people is the 45% tax they have to pay instead of 30% [plus surcharge],” said Amarpal Chadha, a partner with EY India, a unit of one of the world’s biggest accounting firms. “The government has clarified enough it won’t take any action against the people who make declarations. Despite that, we have not seen a huge response.”

A jack-up in tax revenue through voluntary disclosures of secret assets would help Mr Modi improve India’s dismal taxto-gross domestic product ratio as he seeks to narrow Asia’s widest budget deficits. It would also help him score some political points, especially before the assembly elections in India’s most-populous state, Uttar Pradesh, next year.

The government has tried everything from threatening advertisements to talks with corporate executives to make people declare their undisclosed funds. As less than 5% of people in India file tax returns it will have to put in extra efforts to catch the offenders.

A panel appointed by India’s Supreme Court this year recommended a ban on cash transactions exceeding 300,000 rupees and limiting cash holding with a person to 1.5 million rupees.

“Once generation of black money is curbed, the growth rate of the economy will also start rising,” said Rakesh Nangia, managing partner, Nangia & Co. “Like many election promises, the one about returning black money too was an empty one,” said Nikita Sud, associate professor of Development Studies at the University of Oxford. “Where does ever-increasing election expenditure come from?”

Mr Modi’s Bharatiya Janata Party spent about 7 billion rupees in the 2014 polls in what was estimated to be the most expensive elections in the country. The main opposition Congress Party, which saw one of its worst defeats, spent 5 billion rupees.