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Black money

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  3 July 2017 12:00 AM GMT

Now that Goods and Services Tax (GST) regime is in place, how it will help in the war against black money will be watched keenly in the coming days. Tax experts claim that the country’s biggest indirect tax reform will also impact direct taxes as the tax base widens and collections improve. The PAN and Aadhaar linked online GST filing system will make it difficult for assessees to under-report transactions and evade taxes — the idea is to generate bills for every purchase and sale. This will ensure a paper trail that can be accessed by a dual monitoring structure to be operated by the Centre and the States. Prime Minister rendra Modi has already dubbed GST a new chapter in Indian economy which will make life extremely difficult for tax evaders. In this context, he has pointed out that only 32 lakh people in the country declare their income in excess of Rs 10 lakh. Clearly, bringing more people into the tax net will herald that the tide is turning against black money. So will traders become more transparent and tax compliant, or will they figure out ways to beat the system? Can the government implement the anti-profiteering clause in GST law to ensure that traders will pass on benefits of tax cuts or cost reductions under GST to consumers by lowering prices? As the GST regime takes hold, it has to be remembered that while the government has kept out petrol and diesel from its ambit, other notable exclusions are liquor and real estate, while gold has again been given preferential treatment. Critics have pointed out that despite real estate being a sinkhole of vast amounts of black money, which has prompted the NDA government at the Centre to ect several regulatory legislations — State governments in their anxiety to keep hold of revenue, filly maged to keep the purchase and sale of land and houses out of GST. As for gold, the Centre has a policy to encourage investments in gold bonds rather than the yellow metal, yet the GST Council still ended up creating an entirely new and exclusive taxation slab for gold at a nomil 3% rate.

However, the war against GST needs to be fought on different fronts, and it is a matter of horses for courses. Addressing a meet of chartered accountants on Saturday, Prime Minister rendra Modi exhorted them to change their perspective and bring more people in the tax bracket. In this context, he mentioned two recent happenings — firstly, post demonetisation, data mining showed over 3 lakh registered companies indulged in suspected dealings, for which registration of over 1 lakh companies have been cancelled and more than 37,000 shell firms identified for strong action; and secondly, latest Swiss banks figures revealing that money deposited by Indians dipped to a record low last year. It is a fact that money parked by Indians in Switzerland’s banks came down to Rs 4,500 crore in 2016 from a high of Rs 23,000 crore in 2006. The latest data is from Zurich-based SNB, which puts India in 88th place in terms of money parked by its citizens with Swiss banks; these deposits accounts for only 0.04% of the total funds kept by all foreign clients. But these are only official figures showing the liabilities or ‘amounts due’ to clients that Swiss banks currently provide. They do not reflect whether Indian citizens or NRIs are stashing money clandestinely in the mes of bogus entities from other countries, or how many of them have transferred their money elsewhere after Switzerland began the process of loosening its centuries-old banking secrecy practices. The Swiss disclosures will become more comprehensive and interesting from 2019 onwards, which will be the outcome of Switzerland last month ratifying the global convention on automatic exchange of information (AEOI) on fincial transactions by the country’s residents. This means that Indian authorities will get information of Indian deposits in Swiss banks automatically, rather than applying for specific information against suspect account-holders, and proving that credible probes were being conducted against them in India for tax evasion. The Modi government’s resolve will be tested in coming days over how it goes about implementing laws it has ected or amended to prevent stashing of black money abroad and money laundering in the country.

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