Relook into efforts to tackle black money scourge needed

With the Supreme Court directing the government to send the list of black money holders to the Special Investigation Team (SIT), focus has now shifted to the action to be initiated from the court-appointed body headed by Justice (retired) M B Shah.

While it is to be seen how effective the SIT will be in taking action in the matter, all eyes would now remain focused on the future move the court takes on a status report to be filed in the matter.

The Narendra Modi government came to power in May this year riding on its strong campaign against the black money, among others, accusing the previous regime of failing to bring back wealth stashed away in foreign destinations. The government will have to take sincere steps in view of huge public pressure. Though it appears honest in its move as seen in promptness in appointing the SIT, the stand it took last month in the SC against disclosure of names earned it substantial criticism. Prime Minister Narendra Modi raised the issue of black money at G20 Summit in Brisbane wherein the countries agreed on the need of transparency and exchange of information to tackle the scourge.

Notwithstanding the international covenants for exchange of information on black money keepers, the government has to take immediate steps to check generation of such unaccounted wealth within the country. Broadly, experts do agree that the government can declare the wealth generated illegally as national asset, enact or amend laws to confiscate and recover such assets amassed through dirty money and go on to ensure exemplary punishment against its perpetrators.

It is no secret that black money, thus generated through various means, is largely used during elections. So, electoral reforms, including state funding of elections, could be a proposition to be examined in this regard. Tightening of laws, increasing the severity of punishments and speedy trial of cases relating to illicit money generated and stashed abroad through fast track courts could also prove to be another potent weapon to tackle the scourge.

Confiscation of undeclared assets or money kept abroad and monitoring of persons travelling frequently to tax havens and persons indulging in frequent transactions overseas could be other effective means. There have also been demands for de-monetising of higher denomination bank notes of  Rs 500 and Rs 1000 but its feasibility besides the cost on the economy are to be examined.

The question of treating tax evasion a criminal offence was still being internationally debated, the flow of information has improved in recent times with agreements being signed with the foreign countries. As of now, the information received can be used only for tax purposes. This proves to be a major stumbling block in the overall efforts.

With the persistent move, the government can attain progress in the arena of international cooperation in tax enforcement by way of incorporating provisions in the Tax Information Exchange Agreements (TIEA), under which enquiries can be made through Indian missions abroad in the presence of officials of that country and counsels of persons under investigation. There is an urgent need to better regulate the real estate sector, one of the largest contributors to black money within the country.

Leakages from public expenditure is another potential source of black money which is first generated within India and then some of it transferred abroad. The government can bring out a disclosure scheme exempting prosecution under the Income Tax Act for those willing to declare their unaccounted income and assets both in India and abroad.

Notably, certain countries such as Belgium, Sweden, Norway, etc, allow repatriation of black money. There is no international consensus or law for declaring tax evasion a criminal offence, but there is a need to distinguish tax evasion from legal and illegal sources.

Recovery provisions
International consensus regarding recovery of black money, which is otherwise possible only under United Nations Convention Against Corruption (UNCAC) and Mutual Legal Assistance Treaties (MLAT), or through specific recovery provisions in tax treaties could also be worked out. Another important contributor to black money in the country is outdated laws and their lax administration by the state governments such as stamp duty values being completely out of line with the prevailing market rates. The state governments have to be involved in tackling the menace of black money as they are important stakeholders.

There has also been demand every now and then from different quarters to enhance the maximum punishment for offences under the Prevention of Corruption Act from the prescribed seven years to 10. The government could also look into fixing a limit on carrying and holding of cash for personal use, after examining the feasibility of amending either the existing laws or by enacting a new statute. The corruption at the grassroot level for works like obtaining licenses or procuring services as part of government’s delivery mechanism is faced by millions of ordinary people in our country. That remains another area of concern.

Instances of largescale corruption, however, have created a shock and awe effect. This also had a propensity to provide a rationalisation for it apart from creating punitive cost on the poor and lower middle classes. Bribes exchanged in public private partnership of large projects, allocation of natural resources through discretionary and non-transparent means, defence procurement, foreign consultancy, aircraft purchases, petroleum and gas sectors, purchases abroad are to be curbed.

Reforms in spending in social sector schemes involving huge public expenditure through direct transfers to the accounts of beneficiaries can come as a solution of leakages.

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