What is common between an amnesty-like scheme announced by governments for black money holders and a state-sponsored farm loan waiver for borrowers? The honest citizen, who till then paid his dues to the state, is made to feel dejected and fooled by the same Government in both cases—the taxpayer during the amnesty scheme and the bank loan borrower in the other.
Finance minister, Arun Jaitley, in the Union Budget 2016, announced that a four month (June 1 to September 30, 2016) amnesty-like scheme will be given to domestic black money holders in India to disclose their illegal, unaccounted wealth by paying a total of 45 per cent 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 domestic blackmoney holders announced by Indian government in recent times. The first was in 1997, during UPA, when P Chidambaram was Finance Minister (when the government collected Rs10,000 crore). Besides that, after the Narendra Modi-government came to power, it announced a 90-days amnesty-like window for foreign blackmoney holders charging them 60 per cent 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 blackmoney stashed abroad.
The fate of this current exercise wouldn’t be too different (to be sure, it is quite possible the domestic black money would be much bigger in quantum than what is across the border since someone who developed the guts to accumulate unaccounted wealth for years and keep it safe fooling the government and the fellow-taxpayers, would not want to forgo 45 per cent (nearly half) of his booty and be in the good book of the state. This is one reason why the amnesty for foreign blackmoney holders failed miserably.
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 blackmoney is easily accepted), below the bed or safe in the septic tank and wait for the next round of amnesty to come clean.
In a separate context, this is what happened during the 2008, Rs70000 crore farm debt waiver by Chidambaram too. The government promised to waive off all the loans of farmers, leaving the honest borrower feel like an idiot. More recently, the same happened in Andhra Pradesh too, when the new twin states announced a waiver of farm debt. At the very first mention of the waiver, even those who paid their installments regularly to banks stopped paying thinking that even their loans would be waived off at some stage. The credit culture was destroyed and broke the back of state-run banks.
When it comes to amnesty for blackmoney holders, one can not blame the Narendra Modi-government alone for this. This is precisely what the UPA too did. What this proves is the weakness of the government to unearth blackmoney hidden right under its nose despite having all state machinery at its disposal.
And the blackmoney holder knows it, hence he wouldn’t be too perturbed to do what he does best—keep making a mockery of the law of the land. This is evident from the last round of amnesty announced by the NDA-government for foreign blackmoney holders. Only abut 600, possibly the vulnerable small fishes in the pond, agreed to enter the net, while the sharks and whales smiled at the idiotic lot from their dark safe havens. This time too the story would be not so different. The point here is does the government have enough machinery to hunt down blackmoney holders and recover their ill gotten wealth instead of offering them asylum.
Secondly, the government’s own credibility to hunt blackmoney holders is questionable. That’s because a good part of their election spending is done using the same blackmoney. If the whole of black money turns white, then who will fund the political extravaganza, the spectacles and the chest thumping in mega rallies during election festivals? It can’t be from the miniscule subscription fee by workers and donations by sympathizers.
Going by an analysis of Association for Democratic Reforms (ADR) and National Election Watch for 2013-14, the source of funds for most political parties remain opaque. At present, about 75 percent of the sources of funds to political parties remain unknown. This is in contrast to the system in place in many other countries such as Bhutan, Nepal, Germany, France, Italy, Brazil, Bulgaria, the US and Japan, where the complete details of the donors to political parties are publicly available. When one of the biggest beneficiaries of unrecorded financial transactions are political parties themselves, how do one expect politicians to act honestly to put an end to black money dealings in the domestic economy? There is no escape from this evil unless the root cause of the problem is addressed. Period.
The question is will the Modi-government fist take firm initiatives to make every penny of political funding transparent? Returning blackmoney from the foreign lands (the Swiss accounts of the world) was a much-hyped election promise made by Modi himself during the run upto the 2014 general elections. Till this point, the government hasn’t had much luck in fulfilling its promise.
The bottomline is this: Jaitley’s 4-month window is unlikely to win major goodies for the government exchequer, going by the past experience. But the larger concern is offering amnesty to people who chose to fool the state for years is an injustice shown to honest taxpayers and can send a wrong message to him. That can complicate the problem.