Black money law: Carrot might have failed but stick should do the job

The Modi government has apparently not been successful with the first part of its 2015 black money law with only Rs 3,770 crore declared by 638 Indians. There is a smirk on the face of opposition politicians bordering on contemptuous triumphalism with I-said-so body language completing their narrative. AAP’s Ashish Khaitan calls it a chickenfeed vis-à-vis the alleged tall claim made by Prime Minister Narendra Modi in his 2014 election speeches that black money stashed away by Indians abroad was in the region of Rs 80 lakh crore, enough to beget Rs 15 lakh per citizen if it was retrieved.[caption id=“attachment_2334664” align=“alignleft” width=“380”]  Representational Image. AP [/caption] The Modi government’s detractors have got it wrong. At least their opening of the bubbly sadistically is premature. For, the 2015 black money law is an extraordinary piece of legislation, never attempted before – it is not a scheme but a permanent law in the statute book till it is repealed by Parliament. It has two legs – carrot and stick. Carrot, being a weak leg to stand on, has failed. But then the three month compliance window was just a warning notice. The law clearly says from 1 April 2016, the second leg, stick, will take over. If resident Indians are caught with undisclosed income or wealth abroad, it would be effectively confiscated. That is what an impost of 120 percent portends. In addition, a 10 year incarceration also stares them in the face. The compliance window asked for half this amount i.e. 60 percent with honorable life guaranteed with reputation not besmirched thanks to the non-disclosure of names clause. Cynics wonder if the Modi government would be able to make the stick work where the carrot has failed. To be sure, their cynicism is borne by experience thus far. The quinquennial amnesty schemes from independence till 1997 were a massive failures with tax evaders cocking a snook at the impotence of the successive governments and their schemes. The Wanchoo committee of yore impishly pointed out that such schemes were morally unsustainable with same set of people participating in successive schemes despite the last-chance-to-return-to-the-path-of-rectitude rhetoric marking the last para of successive schemes! But then, the 2015 law is not an amnesty scheme. It is a riot act. The Modi government must fire on all four cylinders to not only silence its detractors but also to live up to its promise. People won’t mind if Rs 15 lakh is not credited to their bank accounts but they will if the government proves to be pusillanimous. The international ecosystem fortunately for the Modi government is conducive, with OECD nations in particular girding their loins to frustrate black money and its concomitant, money-laundering. The Swiss are also no longer blasé about their much-vaunted banking secrecy laws. In fact a couple of Swiss banks warned their depositors to come clean and present themselves before the compliance window, knowing as they did what was to come. The Swiss spilled the beans to the US Inland Revenue fearing trouble ahead for their Manhattan based branches if they didn’t cooperate. Ah, the cynics says, India is not the US. May be but it can rope in the US and other economic power houses to break the recalcitrance of the Swiss which of course may not be needed given the hints of good behavior in the recent past. Lastly, what about round-tripping? It is common knowledge that bulk of the black money far from being stagnant in Swiss and other salubrious climes is actually sloshing around merrily. There are credible reports that black money first goes out of India through over-invoicing of imports or through the subterranean hawala channels only to return to India via Mauritius with which we have an invidious tax treaty as FII investments in the bourses more particularly as the opaque participatory notes. In other words, a large share of foreign investments is believed to be actually Indian investments duly laundered. The GST law that is hanging fire would considerably reduce black money generation in the country if properly framed and implemented because the entire supply chain would insist on invoice from their predecessors in order to be eligible for set off for tax already paid. In addition, the Modi government must lose no time in ushering in state funding of elections, warts and all. The charge against the BJP is it barks and does not bite because it is the alleged largest recipient of corporate donations in cash which is why it and indeed the Congress led dispensations in the past have winked at black money and round-tripping. This one single act would send its stock high and give it the moral high ground besides restoring its credibility on the black money front. Elections can be won on the basis of track record and not essentially on the back of money power.