Govt. should offer six-month Amnesty scheme to bring back black money
Estimating that about $2 trillion black money from India is stashed overseas, ASSOCHAM Direct Taxes Council chairperson, Mr Ved Jain suggested the new government to come out with a six-month amnesty scheme that will facilitate transfer of such funds back home on voluntary basis with payment of 40 per cent tax.Supporting efforts of the new Government to find legal ways to bring black money stashed abroad to India, ASSOCHAM has submitted proposal to the new government in this behalf, informed Mr Jain.
The proposal will also be sent to the Special Investigation Team (SIT) formed at the behest of the Supreme Court which has already begun its deliberations, said ASSOCHAM Senior Vice President, Mr Sunil Kanoria while releasing a paper on Black Money along with Mr. Jain, Mr. R.K. Handoo, Chairman, Legal Affairs Council of ASSOCHAM and Secretary General Mr. D.S. Rawat.
The chamber had commissioned a Theme Paper on the subject 'Black Money Menace in India' to an expert group in the Chamber and recommended practical solutions to get these mammoth funds back into the official channels and contribute to the national building.
The amnesty scheme limited to six months suggests a 40 per cent tax on voluntarily disclosed funds topped with a ten per cent investment of the total money brought back in infrastructure bonds. The 40 per cent tax deduction is ten 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.
According to the paper, the government should not use the revenue for bridging its budget deficit but channel it to specific projects of larger benefit including infrastructure development.
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An integral part of this strategy is the total transparency in political funding with the election expense ceiling off, a real time disclosure of all sources of funds and expenses out of them and a partial funding of election expenses for all serious candidates and parties under a national compact among all stakeholders.
There is also a need to introduce uniform stamp duty rate applicable across the country. ASSOCHAM is of the view that a stamp duty rate of three per cent (3 per cent) is fair and reasonable rate. To curb under reporting further, the organization has also underlined the need in cases of repurchase of property, for benefit of allowing credit of the stamp duty paid at the time of the purchase.
To further reduce the temptation for underreporting of purchase price paid, ASSOCHAM also wants the circle rate to be notified every year on the basis of the data input for the preceding year so as to make sure that the circle rates are as good as the prevalent market rate.
Taking into consideration that a new land acquisition law has now come into force and bulk purchasers of agricultural land have to pay higher prices on record to take care of rehabilitation of the users also, the higher price paid by real estate business would inevitably be reflected in the resale of developed property. If steps are not taken to rationalise stamp duty and other commitments to the various government authorities the pressure under reporting would only be even more than before the new law came into force.
Reduction in the stamp duty rate with credit of the stamp duty paid at the time of the (earlier) purchase will not have any impact on the revenue collection of state governments and will go a long way in curbing the menace of black money.
On the possible benefits of a well devised amnesty that does not encourage tax evasion and makes the offender pay for his wrong doing, ASSOCHAM paper has pointed out that in the United States more than 14,700 tax payers took advantages of such a scheme in that country and made a voluntary disclosure. Similar move in Germany saw 20,000 taxpayers make a voluntary disclosure giving government there about 4 billion Euros in additional revenues.
According to various studies that the ASSOCHAM has quoted, the Indian wealth so held abroad illegally varied from Rs 600 crores in 1953-54 ( or 0.6 per cent of then GDP) to Rs 60,000 crores per year , the estimate given by the Indian Institute of Finance. A credible estimate is difficult to establish. This menace of black money afflicts other countries also including highly developed economies like the US.
Referring to another related problem of Havala, the paper noted that with a burgeoning number of Indians working abroad and sending money home, the illegal and parallel transactions have also become as much a danger as smuggling and a means of siphoning off dollars that should come to the legal system of the country instead of being diverted into illegal accounts held abroad.
India is the world's largest consumer of gold in the world and that there is a general preference among middle class across the country for keeping their savings in gold has its own implications for any attempt to curb black money. As in exchange rate gaps, the aligning of laws and rules with market realities would help tendency to get gold at any price. There has also to be massive efforts at educating families to hold savings in credible and legal financial instruments that are safe.
While restrictions introduced by Indian government on gold and diamond imports have reduced dollar demand for gold imports, the measures have also made smuggling of these items profitable to those engaged in such illegalities. It also led to legitimate business of gems and jewellery, a huge foreign exchange earner for the country, affected badly and thereby threatening foreign exchange earnings of the country.
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