In last few years Black Money is raised as a prime issue in India Politics. About two years ago when different political parties were setting its own agenda, BJP Prime Ministerial candidate Narendra Modi raised the issue of black money very prominently. He promised to bring back black money to India. At that point of time nobody had taken him seriously because it is not an easy task to bring back black money from tax heaven countries. But after enactment of “Black Money (Undisclosed Foreign Income and Assets) and Imposition Tax Act 2015”, it become very natural to discuss on black money act and its impact.
In his radio programme “Mann ki Baat” PM said “Those who have not yet disclosed their undisclosed income have last chance to disclose it till 30th September this year after that govt will take very strong action against them. This statement is also become very important because in its recent report Swiss Bank has reported that there is a stiff decrease in deposits of Indians in Swiss Banks is noted. It is decreased by 1/3 and reached to the record low level of Rs. 8312 cr.
According to a study of a Washington based think tank during 1948-2008 total Rs. 25 lakh cr. Has been sent out of India. In an another study by a renowned economist Arun Kumar Indians have kept Rs. 30 lakh cr. Black money in tax heaven countries. If Rs. 25 Lakh cr is equally distributed among 6.38 lakh villages, every village will get Rs. 3.92 cr which can be used for construction of school, colleges, hospitals etc. This money can be used for paying debts of country and after paying debts remaining money will earn interest more than total tax collection of Govt. It means government can free citizens from tax or can collect a very little amount of tax for a very long time. But there are many obstacles in this path. A large number of countries encourage such kind of transactions to bring foreign investment in those countries. India’s black money kept in aboard is surrounded by these four devils (CHANDAL CHOUKRI):
Tax Heavens: Bahamas, Bermuda, British Virgin Island, Isle of Man, Cayman Island, Jersey, Monaco, Saint Kitts and Nevis, Argentina, Mauritius, Switzerland and Marshal Island, these are called Tax heaven countries, to attract foreign direct investment they have made investments tax free or if there is any tax, that is very marginal. Banking laws also provides investors shield as in many countries banking laws restricts banks to share information of its account holders. Few countries also provide citizenship to investors which in turn make those investors eligible to enjoy very lucrative taxation policy.
DTAA: Double Taxation Avoidance Agreements are signed by the governments of two countries to allow their citizens to do business smoothly. These agreements provides that if citizen of one country doing business in another country, then he need not to pay tax in the both countries. He will pay tax in that country where he is doing his business. Similar kind of DTAA has been signed by India with Mauritius, where income on investment from Mauritius is totally tax free in India. Now if someone invest in shares in India directly, he need to pay tax on capital gains and if same investment is made via Mauritius route he have to pay nothing on his income. It is estimated that out of total FDI 40% comes from Mauritius route, which in turn causes revenue loss for government. This kind of round tripping is major cause of generation of black money.
Political Will: In a recent interview PM said “we need to think about election reform”. Why this reform is required? It is estimated that total Rs. 30 thousand crs were spend by the political parties in last general elections. Who is providing this money? These all are black money which is circulating inside the country and there is no accountability of this money. Political will is also required in making laws. It is estimated that near about 70%-80% unaccounted money is circulating in real estate sector and Mafia’s are seeded by these money.
Corrupt Bureaucrats: Merely making a strict law is not enough, law needed to be implemented and it will be implemented by bureaucrats. In recent past corruption in bureaucracy has been a major problem in India and thus a reform is also required in working of bureaucrats.
PM has set up the deadline of 30th September and time will decide how he succeeded in curbing black money.