Tuesday October 23, 2018
Home Uncategorized Black Money: ...

Black Money: India ups ante against tax evaders

0
//
315
Republish
Reprint

By NewsGram Staff Writer

New Delhi: Out of the promises that brought Indian Minister Narendra Modi to fore a year ago, a major one from the dreamy list was to bring back billions of dollars of black money that the country’s super-rich had stashed abroad. In a bid to live up to the same, his government has introduced a string of tough new measures in recent months to crack the whip on black money.

Photo credit: ecointersect.com
Photo credit: ecointersect.com

The anxiety has deepened in recent weeks as a government-imposed tax payment deadline for those who have stashed their cash in foreign accounts approaches on September 30.

The Associated Chambers of Commerce and Industry of India recently issued a statement denouncing the new law for creating “fear and panic” among industry leaders and trading professionals.

“People are uneasy and worried. The penalty and term of imprisonment are disproportionately high,” said Nishith Desai, a corporate lawyer in Mumbai. Industry experts say the rich are frantically searching for new tax havens and other ways to evade the law. No one knows for sure how much black money is hidden in India and overseas.

However, estimates range from $400 billion to over $1 trillion.

India’s history as a socialist-leaning country unfriendly to business with endemic corruption meant that the country’s rich routinely hid their wealth by hoarding cash and jewellery.

India’s ‘shadow economy’ accounts for over 20 per cent of its economic output. Only 3 per cent of the country pays income taxes. This was revealed by a World Bank estimate in 2010.

Two years ago, the investigative portal Cobrapost conducted a sting on 28 top state-owned and private banks across India in which executives were filmed on hidden camera offering to channel vast sums of customers’ unaccounted cash into the formal banking system. Real estate is another common hiding place for untaxed money.

“Land is where Indian politicians and businessmen park the maximum amount of black money. About 30 per cent of all land transactions across India are managed in cash,” said Pankaj Kapoor, founder of the real estate research firm Liases Foras in Mumbai.

According to the election watchdog Association for Democratic Reforms, 80 per cent of the income of five national political parties comes from unknown sources.

black-money-may-25-sll

“In the disclosures of our elected politicians, you can see the assets have grown but their income and income tax payment have not grown proportionately. How do you explain that?” asked Ramesh Padmanabhan, a senior chartered accountant in Bangalore.

“The process of formalising the informal economy is underway in India,” said Rajeev Chandrasekhar, an independent MP (Karnataka and Bangalore Urban constituency). “A lot of people who are used to an old model of doing business in India are uncomfortable today about the new scrutiny.”

During his election campaign, Modi made the claim that so much money was stashed overseas that if he repatriated it he could deposit Rs 15 lakh into the account of every poor person.

“The big fish must not get away,” Indian Finance Minister Arun Jaitley said when the black money law passed in May.

But interviews with chartered accountants, tax officials and businessmen reveal that in recent months many of India’s wealthy have found new ways around the scrutiny.

A favourite tactic, accountants said, is sending family members abroad for 182 days, after which time they become “non-residents” with foreign accounts and businesses where the family members can stash money.

So far, only one wealthy person has reported black money holdings and paid the tax and penalty.

SC questions Centre on black money

For representational use only
For representational use only

After a seemingly long slumber, the Supreme Court on September 4 put the spotlight back on black money by questioning the Centre to detail the action taken on the special investigation team’s (SIT) recommendations, advocating stringent measures against irregularities in capitation fees, cricket, stock markets and trade-based money laundering.

A bench of Chief Justice HL Dattu and Justices Madan B Lokur and AK Sikri asked attorney general Mukul Rohatgi, “What is the fate of these recommendations by the Supreme Court-appointed SIT? The Centre will tell us about it in the next hearing on October 28.”

The story draws its source from IANS & TOI.

Click here for reuse options!
Copyright 2015 NewsGram

Next Story

Political Climate Accused Of Encouraging The Promotion Of Black Money

There is a third reason why people who are tracking black money should not be looking at Swiss Banks

0
fraud
Political Climate Accused Of Encouraging The Promotion Of Black Money. Pixabay

Last week, the political climate was charged with accusations that the government had actually begun encouraging the promotion of black money. Prima facie, the charges seemed to have some merit in them. Swiss bank deposits from India had swelled by 50%, one of the largest increases in recent times. But the accusation was a bit uncharitable. For three specific reasons.

First, even though the percentages seem high, the total amounts involved in Indian deposits with Swiss banks are not. At CHF 1.02 billion – even after accounting for the 50% jump – the amount is significantly lower than the CHF 6.46 billion in 2006 when the UPA was in power. In fact, Indian deposits with Swiss banks had been declining for the past three years – right from 2014 when Prime Minister Modi formed his government. It was only last year that the trend was broken and Swiss deposits began climbing again.

The second reason was that Indian deposits with Swiss banks account for just 0.07% of global deposits with Swiss Banks. That is one of the lowest levels ever during the last decade, overshadowed by an even lower share of 0.05% in 2017. At such percentages, India’s deposits with Swiss Banks are not much to rant and rail about.

There is a third reason why people who are tracking black money should not be looking at Swiss Banks. True, they were the best shelter for clandestine money in the past. But Switzerland has entered into several bilateral treaties for making disclosures about bank deposits to requesting states. That includes a treaty with India to provide real-time information with regard to Indians from January 2019. Obviously, any Indian who wants to stash away black money will not do so with Swiss Banks, because he would stand exposed.

There could, thus, be one credible explanation for the quantum of deposits in Swiss Banks going up. It could be found in the government’s decision to ram through amendments to the Foreign Corrupt Practices Act (FCRA) in March this year.

which seeks to exempt political parties from disclosing their source of funds from overseas. The courts had earlier demanded that political parties make these disclosures and the government thought it wiser to try and change the law instead. This move is now being challenged before the Supreme Court as being unconstitutional by public spirited persons like EAS Sarma. The decision of the court is still awaited. The amendment to the FCRA technically permits politically connected parties to put their money back with Swiss  Banks where it is safer than in tax havens with not-so-unblemished a banking record. If this explanation is correct, one could say that the government, in collusion with all other political parties (all have kept quiet about these amendments), are responsible for the spurt in Swiss deposits.

cartoon showing black money
Cartoon Showing Black money. Flickr

As mentioned in these columns earlier, if people want to look for black money, they should first demand a full fledged investigation into the agriculture income disclosures before the tax authorities during 2011 and 2012. What makes those disclosures horrifying is (a) they were larger than ever before; (b) the cumulative value of disclosures during the two years was a mind-boggling Rs 874 lakh crore (Rs 874 trillion); (c) the cumulative value  of disclosures was eight times India’s GVA for 2013, and almost 100 times the total tax collected in that year.

It can be found in the decision of the enforcement authorities of not auctioning off properties they have seized in the past – irrespective of whether they relate to the NSEL Scam or the politicians who are being investigated for corruption (on extremely narrow charges). Attachment of properties makes for big news, full of sound and fury. But the refusal to auction them off points to collusion.

It can be found in the files of scores of senior officials who were suspended, when fraud was discovered, and then reinstated when public memory died. It can also be found in the files that routinely get burnt in fires that take place at government offices – possibly aimed at making evidence disappear – especially when it comes to corrupt deals and land development scams.

Also read: Punjab’s Aam Aadmi Party and Its Political Self Goals

But these are things politicians do not like to talk about. Many of them are collusive partners in the generation of black money. Their silence in permitting the amendments to the FCRA is ample proof of their willingness to allow a cover-up. The rantings and ravings against Swiss Banks are, therefore, of no consequence. (IANS)