Black money, a shame for govt

The poor response to the one-time compliance window under a scheme for disclosure of black money kept abroad is a setback and an embarrassment for the government. When the scheme ended last week, only 638 declarations had been made, yielding just Rs 4,147 crore. This should be contrasted with the claims made by the BJP and Prime Minister Narendra Modi during the campaign for the 2014 elections that the billions of crores of black money stashed abroad would be brought back to the country. Modi’s promise that every Indian would get Rs 15 lakh from the retrieved wealth still haunts the party, though it has tried to wriggle out of it. The government has also given excuses for its inability to recover the black money kept by Indians in foreign bank accounts whose details are known. It has given the same excuses as were given by the UPA government.

There are many reasons for the failure of the disclosure scheme. Though the government has promised to keep all information disclosed under the scheme confidential, many didn’t believe it. There were fears of harassment and prosecution by tax officials in future. It was also felt that there could be follow-up disputes which would not come under the protection provided by the scheme. Another, and perhaps, more important reason was that 60 per cent of the disclosed income had to be paid to the government as tax and penalty. Why would people pay such a huge part of their black money to the government and invite possible trouble too, when there are better ways of turning it white or to bring it home? The hawala system is still strong and devices like participatory notes are in common use to bring black money from abroad into the stock market.

When there are painless, risk-free and even more profitable ways to keep, enjoy and sanitise black money, schemes like the one announced by the government would have no attraction. The environment in the country is suitable for generation and wide use of black money. The government has not taken any steps to curb it in areas like real estate and construction, imports and exports and party finances and elections where it is most rampant. Unless black money is curbed and eliminated in these and other fields, any initiative that the government takes to fight it will not carry conviction. It will not be effective too. The warning that those who did not come clean will regret it later will not be taken seriously as long as the nexus among politics, business and government exists and is strong.