Education

Reject tax amnesty for the mega-rich

T.N.Pandey | Updated on October 09, 2011

Amnesties cannot be a solution to the problem of black money. The revenue gains are not commensurate to the damage done

According to a report in a prominent English daily on September 15, “devising an amnesty scheme for offshore black money of Indians” was one of the demands of a team of industry captains (that met the Finance Minister in August) and included Mr Ratan Tata, Mr Anil Ambani, Mr Anand Mahindra, Mr Y.C. Deveshwar, Mr N.R. Narayana Murthy, Mr G.M. Rao, Mr R.P. Goenka and Mr Shashi Ruia, among others. It was argued that such money lying idle could be brought back to the country and invested in infrastructure sector, where huge funding of $1 trillion over the next Plan period is required. The suggestion is fraught with many contentious issues and needs to be rejected outright, inter alia, for the following reasons:

In the press release dated September 6, the Government of India has accepted that “there is no reliable information about the money of Indians in undisclosed bank accounts outside the jurisdiction of the country”. Hence, an amnesty scheme for bringing huge sums of money to meet the country's funding needs would be only a shot in the dark.

The highest amount that India could collect via amnesty by its last Voluntary Disclosure of Income Scheme in 1997 was Rs 10,050 crore. When this is the position regarding black money under the Government's control, the position regarding offshore black money can only be worse.

No need to beg evaders

The Income-Tax Department says that it has developed robust techniques of getting information, which would drive delinquent Indians to avail of the amnesty scheme. This is only a tall wish. If the techniques are ‘robust', then why should the Government itself not use the same for capturing concealed incomes instead of depending on the mercy of evaders to pay via amnesty and approach them with a begging bowl? No doubt, a global move for amnesties is getting generated but, except the US, other countries are still in the initial stages of formulating a workable scheme.

India need not show over-enthusiasm for this. In the US, the declarants were made subject to heavy penalties, which would be unacceptable in the Indian scenario.

The fundamental aspects, concerning such a scheme in the Indian context, are as follows: Such schemes are, prima facie, objectionable on moral grounds, as these give dishonest taxpayers an edge over honest and law-abiding taxpayers. This amounts to abdication of government authority in regard to enforcement of tax laws and accepting defeatism vis-à-vis tax evaders.

Expert committees have denounced amnesties, considering these as extraordinary measures meant for abnormal situations such as after a war or other national crises.

Such measures, during normal times, only shake the confidence of taxpayers and reduce capacity of the Government to deal with law-breakers. Such schemes have a deleterious effect on level of compliance (Wanchoo Committee). Amnesties do not check onslaught (flow) of black money. These only deplete stocks — that, too, not in any significant way.

More harm than good

Thus, amnesties cannot be a solution to the problem of black money. The revenue gains from these are not commensurate to the damage done.

And finally, the rich or mega-rich of the country have to change their mindset and, instead of transferring incomes or wealth to offshore destinations, without tax payments, and then arranging for its repatriation through amnesty schemes, need to develop nationalist outlook.

(The author is a former Chairman of CBDT)

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Published on October 09, 2011
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