In both print as well as electronic media,there is hue and cry over the overwhelming quantum of black money that is stashed abroad in foreign banks.In parliament,we do witness disruptive scenes over one political party trying to bring its opponent on its toes over the black money issue.Further,the incumbent Prime Minister,in one of his campaigns for Lok Sabha elections assured the people that if all the black money stashed abroad were retrieved,each household would get an amount of 15 lakh.His assurance of bringing back every pie of black money within six months has added to further hopes among the common people.
But the moot question is:How far is it practically possible to bring back black money stashed in foreign banks?In my view,under current circumstances,it is highly unlikely.I would like to put forth some arguments to substantiate the claim.Investments pour in the foreign banks primarily due to the inherent nature of keeping identity and quantum of money a secret,rather than returns on investments which is considerably very low.Moreover,financial services is a money-spinning sector in countries like Switzerland.Thus,divulging details of their account holders so easily would prove to be a risky step for an economy depending on financial services as a major contributor to its economy.
The Swiss authorities have stated that they would divulge details about the account holders provided the allegations of tax fraud are proved against them in a court of law.But,determining tax evasion is a cumbersome step.It is because the transactions of black money change hands frequently thus making it difficult to determine the exact source of its generation and the quantum of black money.India withdrew at the last moment from signing a treaty with Switzerland on Multilateral Competent Authority,which will provide for automatic exchange of information from 2017.
India can still sign the treaty.The government should declare tax evasion as a criminal offence.Currently,tax evasion is considered as a civil offence.This has made retrieval of black money extremely difficult as the foreign governments take shadow under the shallower provisions of the Indian law.As recommended by the SIT,Permanent Account Number should be made mandatory for all cash and cheque transactions above Rs.1 lakh.Moreover,there is a need to initiate regulatory measures to curb enormous cash transactions carried out in shopping malls,real-estate sector,education and mining sector.These are the sectors that generate black money.Unless effective steps are taken to stem the domestic generation of black money,Indian economy will continue to suffer.Therefore,the wise thing is to forget the past and bring reforms to prevent generation of black money.
But the moot question is:How far is it practically possible to bring back black money stashed in foreign banks?In my view,under current circumstances,it is highly unlikely.I would like to put forth some arguments to substantiate the claim.Investments pour in the foreign banks primarily due to the inherent nature of keeping identity and quantum of money a secret,rather than returns on investments which is considerably very low.Moreover,financial services is a money-spinning sector in countries like Switzerland.Thus,divulging details of their account holders so easily would prove to be a risky step for an economy depending on financial services as a major contributor to its economy.
The Swiss authorities have stated that they would divulge details about the account holders provided the allegations of tax fraud are proved against them in a court of law.But,determining tax evasion is a cumbersome step.It is because the transactions of black money change hands frequently thus making it difficult to determine the exact source of its generation and the quantum of black money.India withdrew at the last moment from signing a treaty with Switzerland on Multilateral Competent Authority,which will provide for automatic exchange of information from 2017.
India can still sign the treaty.The government should declare tax evasion as a criminal offence.Currently,tax evasion is considered as a civil offence.This has made retrieval of black money extremely difficult as the foreign governments take shadow under the shallower provisions of the Indian law.As recommended by the SIT,Permanent Account Number should be made mandatory for all cash and cheque transactions above Rs.1 lakh.Moreover,there is a need to initiate regulatory measures to curb enormous cash transactions carried out in shopping malls,real-estate sector,education and mining sector.These are the sectors that generate black money.Unless effective steps are taken to stem the domestic generation of black money,Indian economy will continue to suffer.Therefore,the wise thing is to forget the past and bring reforms to prevent generation of black money.
In the current budget 2015-16,the FM has proposed stringent measures to tackle black money.Therefore non-disclosure and non-payment of taxes on foreign assets could land anyone in jail for 10 years.Certain offences are made non-compoundable and the aggrieved would not have the opportunity to approach the Settlement Commission.PAN card information would be sought for major transactions.The government is seriously considering bringing about 'Benami Transactions Prohibition Bill' in the current session of Parliament.
ReplyDeleteThe union cabinet has cleared a bill which would strengthen laws like Prevention of Money laundering act,2002 and Foreign Exchange Management Act,1999 in order to give more teeth to institutions like Enforcement Directorate(ED).The punishment entails penalties upto 300% of total wealth along with a rigorous imprisonment upto 10 years.Moreover,rules would be laid down for Benami Transactions taking place in the country.While these steps are undoubtedly laudable,there are other factors that cannot be overlooked.A major chunk of the black money generates within the country,the notorious sectors being real estate,educational and mining sector.Money is also laundered for drug smuggling and terrorist purposes through Participatory Notes in the capital market.There must be skilled personnels with adequate expertise in agencies like ED so that prompt and effective monitoring is carried out and prosecution happens instantly.Round tripping is a significant area of concern which needs prior attention since the tax havens across the world rely on such routes for fund transfer.
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