With reference to the editorial, “Another tax amnesty?” (November 28), the move to tax the unaccounted money deposited in banks as a consequence of demonetisation at a low rate of 50 per cent instead of imposing a penalty of 200 per cent as stipulated by the Income Tax Act is uncalled for.
Given that those who hoard black money have been given enough chances to come clean, setting a rate of tax that is lower than the 60 per cent imposed in the Income Declaration Scheme of 2015 is self-defeating. Traditional economic theories such as Laffer Theorem, whereby a large tax rate gives way to tax evasion, do not apply here since those who are left with hordes of cash are in a Catch-22 situation. They have no choice but to comply with the directions of the government.
The government could have set a much higher tax rate so that more tax revenue could have been extracted, as demonetisation is a once-in-a-lifetime measure. It would have sent a strong message to those who amass wealth by flouting the law. It would also have done justice to the people standing in queues at banks these days — they would have thought that they were doing so for the good of the nation.
E A Ibrahim
Thiruvananthapuram
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