Swiss banks petrified by Modi's black money law, ask customers to comply
The compliance window is likely to witness a huge surge in activity in the one month starting 1 September.
Right from 1950, India has had the dubious distinction of rolling out amnesty schemes quinquennially so much so that the same set of people participated in successive schemes with a smirk on their faces. This of course by contemptuously disregarding the prior solemn warning accompanying each scheme that it was the last opportunity to return to the path of rectitude.
This telling commentary on the efficacy and desirability of amnesty schemes was made by none other than the Wanchoo Committee of yore.
Now the Modi government has put an end to this farce and mollycoddling of tax evaders and black money generators. For, the black money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (‘black money law’ for short), contrary to the popular notion, is not a typical amnesty scheme but a riot act -- comply or face dire consequences.
It offers a limited compliance window from 1 July 2015 to 30 September 2015 within which one can come clean and pay a tax of 30 percent on foreign wealth secreted away together with a penalty of another 30 percent. Critics say 60 percent is too high an impost even for those possessed by contrition but then they would better comply because otherwise the noose could tighten around their necks.
The black money law says should the assessing officer unearth undisclosed foreign income and asset post this limited amnesty, the consequence would be 30 percent tax plus penalty of 90 percent with the depressing prospect of cooling heels behind bars for ten years.
The law targets residents and therefore there should be no difficulty in nabbing them once the officials have built a watertight case. The ire of the law falls mainly on those who while smugly residing in India salt away their ill-gotten wealth through subterranean channels aka hawala route to salubrious climes like Switzerland, Mauritius and Dubai.
The Income Tax Act 1961 sets the stage for the assessing officer under the black money law to step in and every resident must disclose his foreign assets in his normal income tax return. The ones not declared is what the officer under the black money law is going to pounce on. A good tango indeed.
That the redoubtable Swiss banks of all are asking Indian residents to take full advantage of the compliance window is a definitive straw in the wind that the limited amnesty is going to be a success and that reprisal is going to be swift and fast against recalcitrant black money generators in the years to come. What has made the Swiss and other European banks to relent for the first time is the possibility of their officials being put behind bars in India for seven years in addition to fine for abetting the crime by Indian residents. This is no mean victory for the Modi government. A permanent anti-black money law rather than periodical quasi-permanent amnesty laws was what the doctor had ordered. Modi and Jaitley just delivered that.
Critics say the scheme hasn’t taken off with the grapevine saying that only Rs 70 crore had trickled in under the compliance window in the first one and half months. They forget that even under the amnesty schemes thus far, evaders came forward to make clean breast only in the eleventh hour because avaricious as they are they expect some last minute thaw from the government. Be that as it may, the scheme is bound to be a resounding success at the end of the day because:
• The Modi government has fluttered the dovecots of the formidable Swiss banks notorious for their invidious banking secrecy laws;
• And the Swiss and other European banks are now asking the Indian residents hitherto enjoying their patronage to give an undertaking that their money is legit and in compliance with the Indian laws. Some are also asking auditor’s certificates to these effects.
Verily, the secretive banks unable to withstand the heat turned on them by the Modi government are now putting pressure on their Indian customers to come clean on the nature of money deposited with them.
Modi has been pilloried for making a rash promise that he would get Rs 15 lakh for each one of the Indian citizens from out of the illicit funds stashed away abroad by Indians during his 2014 electioneering. His government has made amends for his act of rashness.
The compliance window is likely to witness a huge surge in activity in the one month starting 1 September, thanks to the cumulative effect of Indian government’s pressure on foreign banks and foreign banks pressure in turn on the Indian residents.
A permanent riot act feared by the formidable Swiss is something no subsequent government at the Centre dare disown and repeal. Modi might well have the last laugh before the Bihar elections. To be sure, he may not be able to give Rs 15 lakh to every Indian but he can go to town and proclaim that he has humbled the formidable Swiss banks as well as the brazen tribe of black money generators in India. Indians by and large savor the sweetness of humbling foreign rogue nations.
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