Has the Narendra Modi government's drive against black money in the Indian economy got somewhat weaker of late? Not really, if you look at the legislative effort on this front. A new law is already in force with stringent provisions against those who have stashed away undisclosed money in bank accounts abroad. The short window of opportunity for people to declare their illegal wealth stashed away abroad and bring it back to the country resulted in the disclosure of an estimated Rs 4,140 crore.
The amount is perhaps too small, and had provoked some derisive comments on the effectiveness of the black money law in particular and the Modi government's drive against black money in general. In his Independence Day address from Red Fort in August this year, Mr Modi had hinted at the black money amount already brought back into the country. But that figure was much more than what the new black money law has actually been able to unearth.
So, there is no denying that the Modi government has made an effort towards fulfilling its electoral promise on black money. The problem is with the huge expectations the government had raised by making what seems to be overstated promises.
At another level, the effectiveness of the government's drive against black money could be gauged by the manner in which many Indian business leaders have already relocated in foreign countries to stay out of the clutches of the overzealous tax authorities or have begun exploring such options. There are no data available to establish the precise number of such departing or fleeing Indian business leaders, but the talk among them does suggest an increasing concern over the Indian tax authorities' overdrive to unearth black money. Many of those who may set up overseas bases to get out of a regressive tax system may justify their move on grounds of business exigencies of exploring global markets, but the trend could be disturbing.
There is a third category of recent developments that might give the impression that the Modi government is cracking down on corruption and therefore on black money. The recent raids on civil servants in possession of assets or goods in violation of the law would fall in that category. However, such government initiatives are being seen as politically motivated. For instance, it has been alleged that the raids against a senior official of the Arvind Kejriwal-led Delhi government were politically motivated.
The recent moves in the Enforcement Directorate, which also functions under the jurisdiction of the Union government, have now come under attack from the Congress as it feels the actions against the Gandhi family for their decisions involving their party and a company owned by them were politically motivated to harass them. There is no way, once again, to get to the bottom of who is right and who is wrong while making these allegations. What is clear is that the Modi government has remained in the news for its actions pertaining to black money and corruption.
In the background of all these developments, therefore, it does come as a surprise when the government allows more transactions to go outside the purview of the Permanent Account Number (PAN) system. Last week, the finance ministry issued a circular that allowed transactions of up to Rs 2 lakh for purchase of goods and services without the mandatory submission of the buyer's PAN details. Earlier, there was no such limit, but the Special Investigation Team on black money had recommended that transactions of above Rs 1 lakh required PAN details and the finance minister in his Budget speech had made an announcement accepting that recommendation. Not just with respect to purchase of goods and services, even the limits on restaurant bills or house purchases requiring PAN details have now been doubled.
The ostensible reason for making this relaxation is the demand made by trade and business to reduce the burden of compliance. Now, submission of PAN details could be a cumbersome procedure and there could be legitimate questions about the need for collecting huge data without having set up machinery to process them for investigations and remedial action. But a government that swears by its drive against black money should surely understand that even when such data are not tracked properly, the idea of requiring PAN disclosures brings a large number of high-value transactions under scrutiny for both direct and indirect taxes.
Raising the transactions limit for PAN details also encourages business and trade establishments to devise innovative ways of splitting the transaction value to seek greater freedom from tax-related disclosures. Either way, it is the tax authorities which would lose revenue and the collateral damage would be black money generation.
Indeed, the finance ministry should go back to Finance Minister Arun Jaitley's earlier resolve to move towards a cashless economy. There was a proposal to offer incentives for transactions using credit cards so that an increasing number of economic activities can come on record and possibly under tax scrutiny. The time has come to encourage the move towards a cashless economy. Exempting transactions of a higher value from furnishing PAN details will take the Indian economy in a reverse direction. This would be neither desirable nor helpful for equitable growth and development.
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
