Without providing an official estimate of black money stashed away at home or abroad, leave alone disclosing the names of any offender, the government, in its >White Paper on black money , on Monday pitched for deterrent punishment through fast track courts to expeditiously deal with such financial offences as part of its multi-pronged strategy to curb the menace of illicit funds.
Tabled in the Lok Sabha by Finance Minister Pranab Mukherjee, specifically at the behest of BJP leader L.K. Advani, the 97-page document said the government would have to take a decision whether India should have a revenue-sharing agreement with Switzerland from taxes on assets held by Indian residents in the European nation without learning the identity of the defaulting Indian residents on the lines of similar bilateral treaties that the Alpine nation already has entered into with the U.K. and Germany. “The government looks forward to discussion on this important issue within and outside Parliament before taking any further steps,” it said.
The White Paper sought to make it clear that the objective of the document was to place in the public domain various facets and dimensions of black money and its complex relationship with the policy and administrative regime while presenting the framework, policy options and strategies that the Centre has been pursuing to tackle the issue.
In the light of the recent initiatives and developments, the paper “is expected to contribute to the ongoing debate on the issue of black money and help develop a broad political consensus regarding the future course of action to address it,” it said.
Detailing the reasons and various means and modes of black money generation, the paper took cognizance of one estimate of the amount of Indian deposits in Swiss banks which noted that the total liabilities of Swiss banks towards Indians at the end of 2010 totalled 1.945 billion Swiss francs or about Rs. 9,295 crore. A more startling revelation is that this marks a sharp decrease from Rs. 23,373 crore in 2006.
The paper also provides a pointer on how the sharp reduction may have come about saying: “The illicit money transferred outside India may come back to India through various methods such as hawala, mispricing, foreign direct investment (FDI) through beneficial tax jurisdictions, raising of capital by Indian companies through global depository receipts (GDRs), and investment in Indian stock market through participatory notes. It is possible that a large amount of money transferred outside India might actually have returned through these means.”
While this holds true not only for illicit funds in Swiss banks but also black money stashed away in various tax havens such as Cayman Islands and Virgin Islands as also low or no tax countries such as Mauritius and Singapore, it is significant that the budget for the current fiscal has sought to plug some of these loopholes by amending or incorporating some of the provisions of the Income Tax Act.
For once, the paper has suggested improved reporting and monitoring systems to track bullion and gold jewellery transactions and simple reporting systems in real estate deals to facilitate the development of a nationwide database to curb black money proliferation. It also made a case for preventing the misuse of “off market” and “dabba trading” (trading outside recognised stock exchanges) on equities and commodities market through further amendments to the tax laws.
The White Paper noted that one of the “four different pillars” in its strategy to stem the black money menace would be the introduction of the proposed Goods and Services Tax (GST) as it would be a major step towards integrating the efforts of different agencies dealing with the problem, especially when the coordination between the various agencies is much less than desired. In particular, the mandatory quoting of the PAN for purchase of bullion worth above Rs. 5 lakh was aimed at catching such transactions.
In this regard, the paper also advocated the use of debit and credit cards for high value transaction as these would automatically leave a trail. “... there could be promotion of banking channels, including use of credit and debit cards since they leave adequate audit trails and hence disincentivise black money generation,” it said.
Suggesting broad strategies on reducing disincentives against voluntary compliance, reforms in vulnerable sectors of the economy and creation of effective credible deterrence, the paper noted that black money cannot be effectively fought unless the judicial machinery to deal with it is specialised and the trial of offences is expeditious and punishments exemplary. The Law Ministry, it said, should take up the issue of setting up fast-track special courts to deal with all financial offences on a priority basis. Alongside, the High Courts may consider setting up exclusive economic offences courts with special summary procedure.
On the issue of institutions like the Lokpal and Lokayuktas, the White Paper said they “need to be put in place at the earliest, in the Centre and the States respectively, to expedite investigations into cases of corruption and bring the guilty to justice.”
