At a time when a panel is looking into the offshore black money issue, industry body Assocham has suggested that the Union government offer a six-month amnesty scheme to facilitate wiring funds back to the country after paying a certain amount of tax.
The NDA government had recently cleared the names of a Special Investigation Team that the Supreme Court had constituted, with Justice M B Shah as its head.
The money stashed away in Swiss banks by Indians had grown to over two billion Swiss Francs or roughly Rs 14,000 crore, notwithstanding the mounting pressure on the banks to shelve secrecy and reveal the identity of the account holders.
The governments in India have been dragging their feet on ploughing back the slush money though they did manage to get some bank details which are just a tip of the iceberg.
The Associated Chambers of Commerce and Industry (Assocham), which came out with a paper on “Black Money menace in India”, suggested that the new government come out with an amnesty scheme that would levy 40 per cent tax on voluntarily disclosed funds, and top off with a 10 per cent investment of the total money brought back in infrastructure bonds.
The 40 per cent tax deduction is 10 per cent above the maximum effective tax on income and would dissuade misuse of the scheme for turning internal black money into white through a transfer mechanism, says the study.
“The proposal will also be sent to the Special Investigation Team formed at the behest of the Supreme Court, which has already begun its deliberations,” said Assocham senior vice-president Sunil Kanoria.
The funds held by Indians with banks in Switzerland rose by over 40 per cent during 2013, from about 1.42 billion Swiss francs at the end of previous year, as per the latest data released by that country’s central banking authority - Swiss National Bank. The Assocham’s estimate is that $ 2 trillion is stashed abroad.
The idea of offering an amnesty scheme is to encourage tax evaders to come forward and disclose their amount which they are unlikely to do due to fear of getting prosecuted.
The industry body paper states that the government should not use the revenue for bridging its budget deficit but channel it to specific projects of larger benefit, including infrastructure development.
A similar attempt was made way back in 1997 when the then government offered a Voluntary Disclosure of Income Scheme (VDIS) and mopped up about Rs 10,000 crore.
The government, however, had to face criticism as some argued that VDIS type schemes encourage tax evaders who know that they can get away by merely disclosing the tainted money and paying a penalty on it.
The matter even went to Supreme Court, where the government said that it would not take recourse to this practice again. But, if the apex court constituted SIT suggests an amnesty scheme, it would make it easier for the government to opt for it again.