By Tarunkumar Singhal, Raman Jokhakar, Chartered Accountants
fiogf49gjkf0d
Estimates of ‘black money’ generated in the Indian economy vary: from rather minuscule amounts of a couple of billion dollars to more unbelievable numbers. The Union finance ministry issued a white paper on the subject that highlighted various measures of black money and what needs to be done to curb its generation. The analysis carried out in it does not represent anything new; it certainly does not give a road map for handling this problem.
In India, the easy fixes to curb tax evasion and the generation of black money have all been exhausted: there will be few, if any, taxpayers who try and evade what they owe the government. The tax administration is robust enough to detect and capture evasion by these citizens. The problem lies elsewhere.
The white paper itself illustrates these issues. Three examples can be highlighted. The issue of taxation of wealth generated in the businesses linked to exploitation of natural resources such as mining, hydrocarbons, telecom and other related sectors; the problem of income in “vulnerable” sectors such as real estate and, finally, the issue of political willpower required to make a difference. In each of these, this government has been an abject failure.
Consider the natural resources sector first. The problem lies in the vast discretionary powers enjoyed in allocating these resources. From spectrum allocation to that of issuing mining licences, there has been little or no transparency. The result is that there are inbuilt drivers to generate illicit wealth. If anything, this government is complicit in this process: it is deeply unhappy with auctions as a process to allocate these resources. In a firstcome- first-served process, there is ample scope for corrupt practices. Clearly, it has to address that issue before it can even argue that natural resource allocation processes are a problem. In fact, the sector can only be dubbed as a ‘politically exposed sector’.
In case of ‘vulnerable’ sectors such as real estate, the cause and effect are mixed: real estate is both a recipient and a generator of black money. Illicit gains made elsewhere can be parked in residential and commercial property without much fear of tax enforcers. But that is just one part of the problem. The high taxes — stamp duty is a prime example — levied make evasion a worthwhile chase. And high stamp duty being an important source of revenue for many states ensures that undervalued transactions are a norm and not an exception.
Finally, this government lacks the willpower to deter potential tax evaders — the big fish that is. The surest way to do so will be to disclose the names of evaders that are available with the government. Given that our politicians are sure to figure on such a list, confidentiality of agreements with other governments and, hold your breath, human rights of tax evaders (page 68 of the white paper) come in the way of public disclosures. This is difficult to believe.
