Note ban had im­pact on black money: Jus­tice Shah

The men­ace, how­ever, con­tin­ues

Financial Chronicle - - FRONT PAGE - NIRB­HAY KU­MAR

DE­MON­ETI­SA­TION had its im­pact on con­tain­ing black money but the govern­ment now needs to im­me­di­ately put cash hold­ing limit on com­pa­nies and in­di­vid­u­als to clean up the sys­tem, said jus­tice (re­tired) MB Shah, who headed the SIT on black money.

Ac­knowl­edg­ing the preva­lence of black money in high value trans­ac­tions such as house pur­chase and land af­ter two years of note ban, Shah said the up­per limit for cash hold­ing should be Rs 1 crore.

“I per­son­ally feel that de­mon­eti­sa­tion had its im­pact (on black money). This re­quired peo­ple to de­clare their un­ac­counted money. No doubt, black money con­tin­ues to be in cir­cu­la­tion but it does not mean that de­mon­eti­sa­tion did not have its im­pact,” he said

Asked what step govern­ment should take next to curb black money, he said there should be limit on hold­ing cash. “The in­come tax au­thor­i­ties seize huge amounts of cash but peo­ple find ways and means to show that all cash does not be­long to them. There should be law to pro­vide for for­feit­ing cash above Rs 1 crore (or max­i­mum per­mis­si­ble limit) to the govern­ment,” the for­mer chief of the Supreme Court-ap­pointed panel noted.

“There is no doubt that black money con­tin­ues to be a ma­jor com­po­nent in real es­tate. While buy­ing agri­cul­tural land, peo­ple are us­ing black money and un­der­state the ac­tual mar­ket value. The govern­ment has taken steps to con­tain black money but peo­ple have found ways to keep un­ac­counted money,” said jus­tice Shah.

Re­strict­ing cash hold­ing was one of the rec­om­men­da­tions of jus­tice Shah to sti­fle the flow of black money in the econ­omy but the govern­ment is yet to act on the pro­posal. Some of the pol­icy mak­ers hold that the idea may not be prac­ti­cally pos­si­ble as polic­ing of it would be dif­fi­cult. Fur­ther, there are MNCs and big cor­po­rate com­pa­nies with mul­ti­ple of­fices in one lo­ca­tion and they may need cash for deal­ing with emer­gen­cies like med­i­cal, fire and other is­sues.

I per­son­ally feel that de­mon­eti­sa­tion had its im­pact (on black money). This re­quired peo­ple to de­clare their un­ac­counted money. No doubt, black money con­tin­ues to be in cir­cu­la­tion but it does not mean that de­mon­eti­sa­tion did not have its im­pact — Jus­tice (re­tired) MB Shah, who headed the SIT on black money

“Not for in­di­vid­u­als but for cor­po­rates there is al­ready a re­quire­ment of record­ing all the cash in their reg­is­ters. Any­ways, I don’t find the idea of re­strict­ing cash hold­ing very prac­ti­cal,” said a tax ex­pert.

Many econ­o­mists and ex­perts are not con­vinced by the ar­gu­ments for de­mon­eti­sa­tion and main­tain that it hardly made any dif­fer­ence. They feel the move dam­aged the econ­omy more than ben­e­fit­ting it.

“At the time of de­mon­eti­sa­tion the govern­ment had hoped that Rs 2-3 lakh crore worth of cur­rency would not come back to the sys­tem as they were ill-got­ten wealth but al­most all the old cur­rency were de­posited in banks,” said an ex­pert wish­ing not to be named.

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