It is good season for black money holders.
On Thursday, the Narendra Modi government said those who would want to declare their ill-gotten wealth by 30 September (when the window closes), doesn’t need to hurry to make their payments by 30 November.
They can do it so in three easy installments -- 25 percent by 30 November, another 25 percent by 31 March 2017 and the balance amount by 30 September 2017. The 45 percent penalty black money holders need to pay include tax, surcharge and penalty.
“Taking into consideration the practical difficulties of the stakeholders, the Government has decided to revise the time schedule for making payments under the Scheme as under,” said the government statement.
“It has also been mentioned that for making payment by November 30, 2016, the declarants may have to opt for distress sale of the assets," it added.
In other words, the government doesn’t want those who generated unaccounted wealth by painstaking efforts of years to go through mental stress thinking how to pay penalty immediately. They can take own sweet time to sell off their ill-gotten assets and pay their penalty.
Arguably, there was never a time in the past when black money holders were given such relaxed terms to disclose their ill-gotten wealth. Those honest citizens who regularly pay their taxes before the deadline would be tempted and jealous to see their not-so-honest counterparts who are being dealt with kid gloves by the government.
Finance minister Arun Jaitley in the Union Budget 2016 had announced a four-month (1 June to 30 September 2016) amnesty-like scheme for black money holders to disclose their unaccounted wealth by paying a total of 45 percent tax. Jaitley hasn’t called it an amnesty, but in principle, it is nothing but an amnesty offered to the outlaws.
This is the second such scheme for black money holders announced by the Indian government in the recent years. The first was in 1997, during the Congress-led government, when P Chidambaram was the finance minister (when the government collected Rs 10,000 crore).
Besides that, after the Narendra Modi government came to power, it announced a 90 days amnesty-like window for foreign black money holders charging them 60 percent tax. A total of Rs 4,147 crore of undeclared wealth was declared and the government garnered Rs 2,500 crore from the whole exercise, a paltry sum considering the kind of black money stashed abroad. This time, the window is open for both resident and non-resident black money holders.
As Firstpost noted in an earlier article, most likely, the fate of this current exercise too wouldn’t be too different.
But the larger point here is by extending a helping hand to the black money holders, the government is being unfair to the honest taxpayer. This will send a signal to him that it doesn’t make sense to pay tax anymore. Instead, the better idea is to stash it in real estate or gold (where black money is easily accepted), below the bed or safe in the septic tank and wait for the next round of amnesty to come clean.
There aren’t two opinions about the intention of the government behind such schemes. It wants to bring back the unaccounted cash to the system. But, chances of this black money window too turning flop like the earlier occasions are high for the simple reason that the cronies and crooked would know how to take care of their wealth. It’s foolish to imagine that they would let go of their booty paying half of it to the government as penalty.
But, the bigger concern is that when the governments announce amnesty schemes for outlaws repeatedly, it will send a wrong signal to the honest taxpayer. This is something experts have warned in the past.
Both the justice K N Wanchoo committee 1971 and the Shankar Acharya Committee in 1985 had pointed out the ill-effects of black money voluntary declaration schemes in an economy if there is no compelling reason in the economy to resort to such schemes.
“Resorting to such a measure during normal times and that too frequently, would only shake the confidence of the honest taxpayers in the capacity of the government to deal with the law breakers and would invite contempt for its enforcement machinery,” the Wanchoo panel had said in 1971.
This time, the government has already come with two amnesty-like schemes for ill-gotten wealth holders, that too with such relaxed payment terms. The short point is that caution is warranted when law breakers are pampered by the government beyond a point.