Black money stashed in overseas jurisdictions accounts for nearly 20 per cent of India's GDP. By this count, black money generated every year must be close to a colossal Rs 4,00,000 crore which is even more than the entire budget of the Government at the Centre and means that large amounts of money is outside the scheme of taxation.
Thus, it becomes obligatory on the Government to take every possible measure to ensure the return of the money stashed away in overseas jurisdictions. This becomes a difficult task even more, after the Supreme Court's observation in the recent Public Interest Litigation filed by a group of eminent personalities, that the government was wrong in treating black money as a tax issue when it was simple and pure plunder of the economy.
The recognition of black money being an important aspect which merits consideration has been on the agenda of the Government for many years. Since 1951, the Government has launched from time to time voluntary disclosure of income schemes (VDIS)/amnesty schemes to unearth black money generated both within the country and outside.
Despite many amnesty schemes in the past, the parallel economy of unaccounted money continues to be a major challenge, signalling that amnesty is not the way to go. Further such schemes are morally corrosive as they offer relief to tax evaders and penalise honest tax payers by default. The amnesty schemes seem to fortify an old axiom that “The path to hell is paved with good intentions”. This approach of introducing amnesty schemes is like ‘compounding the crime of plundering national economy' since there is enormous amounts of money being stashed in overseas jurisdictions.
Amnesty schemes are obloquy since they encourage tax evasion by allowing the dishonest taxpayers to move freely after paying tax on money at lower rates and lower value prevailing at an earlier date on one hand and shake the faith of honest taxpayers in the dignity and sanctity of the systems. These schemes sometimes pour scorn on the systems and the people who pay taxes and are complaint citizens.
Further, the objective of the Government in introducing a new Direct Taxes Code to ensure voluntary compliance, would be hard hit by any amnesty scheme being introduced again.
Further, it is widely understood that the Government in the late 1990s gave an undertaking to the Supreme Court there would be no more amnesty schemes introduced in the country fastening all Governments to come in time by such a promise.
Focus on compliance
Thus, in light of the growing moral censure against disclosure of income/amnesty , the focus should be to prevent stashing away of black money in overseas jurisdictions and ensure better compliance instead of introducing an amnesty scheme. So, the important question that posits here is what a hard-headed Government should do to deal with this continuing menace in the economy.
The Indian Government has taken various active steps recently in this regard by entering into Double Taxation Avoidance Agreements and Tax Information Exchange Agreements with various countries.
Further, recently the Finance Act, 2011 has introduced a new provision, Section 94 A under the scheme of the Income Tax Act, 1961, to provide for anti-avoidance measures in cases of transactions entered into with persons located in countries and jurisdictions which do not effectively exchange information with India.
Further, the recently introduced money laundering law proposed can be expected to deter people from acquiring money/property through unlawful means though it does not have the teeth to eliminate the malevolence of black money.
Thus, the thought of providing an amnesty needs to be carefully measured in terms of the lessons from the past and should be balanced with the recent approach of the Government in seeking measures for dealing with black money instead of giving a ‘fair play' to those who are not deserving.
(The author is Partner, Aamarchand Mangaldas.)