The Budget has taken the black money issue head-on and promised legislative measures. It is now the turn of the Opposition to support these initiatives in Parliament and see the legislative measures through
The Union Budget presented last week by Finance Minister Arun Jaitley has been hailed in various quarters for the clutch of initiatives announced, not only to give the economy a big push but also to offer a meaningful safety net for the under-privileged classes. However, amidst the clutter of numbers and the debate on what each section of the population gains through this exercise, there has not been sufficient focus on a significant move made by the Government to tackle a problem that has sapped the vitals of this country’s economy — black money, especially that which is stashed away in foreign banks.
At first glance, it seems the proposals made by Mr Jaitley in this regard, including new legislations, are both decisive and comprehensive. This is quite in contrast to the laboured, non-serious approach of past regimes, which only offered lip service to the idea of fighting the menace of illicit funds parked abroad. For example, the United Progressive Alliance even brought out a ‘White Paper’ on the issue in 2012, which read more like a college student’s essay than the document of a Government that wanted to get to grips with the issue. This so-called White Paper meandered aimlessly and even spoke of the need to inculcate ideas against black money in young minds via school textbooks!
In order to understand where and how Ministers and Governments can make a difference when it comes to issues like this one, a comparison between Mr Jaitley’s Budget speech and the White Paper will be in order. For example, the UPA’s document is sprinkled with shibboleths such as: “The fight against the menace of black money needs to be fought simultaneously at ethical, socio-economic and administrative levels. At ethical level, we have to reinforce value / moral education in the school curriculum and build good citizens, particularly highlighting the ills of tax evasion and black money. At socio-economic level, the thrust of public policy should be to discourage conspicuous and wasteful consumption / expenditure, encourage savings, frugality and simplicity, and reduce the gap between the rich and the poor.”
Elsewhere in the document, the UPA was hedging its bets. It said while it wanted to bring back black money, this was not a goal that could be achieved unilaterally.
On the other hand, Mr Jaitley declared that the first and foremost pillar of his tax proposals was to deal with the problem of black money and that he would do so “effectively and forcefully”. The Government had already sent a delegation of the Revenue Department to Switzerland and secured firm assurances that they would cooperate in cases investigated by the Income Tax Department; confirm genuineness of bank accounts; provide non-banking information; and respond in a time bound manner. The Swiss also agreed to commence talks on automatic exchange of information between the two countries. This is a distinct improvement to the reluctance of the Swiss authorities to Indian requests in this regard in the past.
The UPA document had, however, lazily stated that there are limited provisions in some of the existing laws for repatriation of undisclosed assets. “Without international consensus on this issue it is difficult to implement domestic law on repatriation of assets located abroad.”
Mr Jaitley, on the other hand, said the Government recognised the limitations of the existing legislation and had taken a decision to enact a comprehensive law on black money to specifically deal with such money which is stashed abroad. The most significant aspect of this Bill, which will be introduced in the current session of Parliament, is the stringent punishment proposed for tax evaders. Under this new law, concealment of income and assets and evasion of tax in relation to foreign assets will be prosecutable with punishment of rigorous imprisonment of up to 10 years and this offence will be made non-compoundable.
Similarly, non-filing of return or filing with inadequate disclosure of foreign assets will be liable for prosecution with punishment up to seven years. Those who abet these offences — be they individuals, banks or financial institutions — will be liable for prosecution and penalty. Two other measures which lend stringency to the proposed law is that the offence of concealment of income or evasion of tax in relation to a foreign asset will be made a predicate offence under the Prevention of Money-laundering Act, 2002. This will enable enforcement agencies to attach and confiscate unaccounted assets held abroad. Also, the definition of the ‘proceeds of crime’ under this law will be amended to enable attachment and confiscation of equivalent asset in India, if the asset held abroad cannot be forfeited. A similar amendment is proposed in the Foreign Exchange Management Act, 1999.
As everyone is aware, real estate transactions constitute one of the biggest sources of black money generation in India. Therefore, in order to tackle the menace of black money within the country, the NDA Government has decided to bring in a comprehensive Benami Transactions (Prohibition) Bill. This will enable confiscation of benami property. In addition, the Income Tax Act is being amended to prohibit acceptance or payment of an advance of Rs20,000 or more in cash for purchase of immovable property.
Four years ago, the Bharatiya Janata Party set up a Task Force on Black Money, which had several eminent members, including Mr S Gurumurthy as members. This group suggested comprehensive legal and administrative measures to deal with the menace, but the UPA, for obvious reasons, was not listening. However, now that the BJP, which has repeatedly promised measures to bring back illicit funds parked abroad, has come to power with a clear mandate, the views of the task force gain currency.
The task force said that as a rising nation, India must set standards. “Being viewed as a corrupt and dishonest nation, and being seen as a nation of buccaneers who bolt away with hundreds and thousands of billions of dollars when a vast section of the ordinary people... are in penury, will hardly give us the moral and ethical authority to be an example to the world”. It hoped the BJP would “dedicate itself to the cause and associate as many critical forces in this sacred agenda”.
Obviously, the Narendra Modi Government shares these sentiments. It is now the turn of the Opposition to support these initiatives on black money in Parliament and see these legislative measures through in this Budget Session itself.