Tuesday , 12 November 2019
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High Wall of  Non-Disclosure

A total of 638 Indian entities have declared a total of Rs 3770 crore in undisclosed foreign assets under the government’s black money compliance window which was left open between July and September. The window was provided to tax evaders under the new law — Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 — wherein they were required to pay a penalty and tax of 30 per cent each in return for an assurance of being spared penalties and prosecution. The disclosed amount is very small compared to the unofficial estimates of black money stashed by Indians abroad which place the figure at hundreds of billions of dollars. According to Global Financial Integrity, about $439 billion of black money left India only between 2003 and 2012. The undisclosed amount is also at great variance with the figure mentioned by Prime Minister Narendra Modi at his address to the nation on the last Independence Day. He had announced that his government had received undisclosed foreign assets declarations worth Rs 6,500 crore. The amount of Rs 3770 crore might come down further if the government has prior information on any of the declared sums and assets from other countries, because that amount will have to be excluded. The actual amount could be determined by the tax authorities only after the cross verification of the declared assets with their existing data.

The undisclosed income of Rs 3770 crore comes to an average of about Rs 6 crore per declarant, which suggests two possibilities. One, the 636 entities have not disclosed all of their foreign assets. Two, an overwhelming majority of entities have decided not to use the government window. The coming of very small amount through voluntary disclosure window is a great embarrassment to the NDA government.  Narendra Modi had made a promise of bringing back all the black money stashed abroad during his 2014 Lok Sabha campaign. He had made black money a key election pitch, making it sound like a vital loss of “nation’s money” which had been stolen and the recovery of which would galvanize the Indian economy phenomenally. He had even promised to the poor people that after he recovered the black money stashed abroad, he would put Rs 15 lakh in the account of every poor Indian. The picture Modi showed voters was of a Great Hidden Treasure whose precious value was inestimable. When month after month passed without a trace of the treasure, opposition parties started stinging him for failing in his promise. After ten months his answer came in the form of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act.

The law is yet to be implemented. The government says the voluntary disclosure window was provided to give an opportunity to people before the Black Money law is enforced strictly. However, there is much for the government to learn from the low compliance under the window before it enforces the law. First of all, scores of tax havens exist today around the world, and not just Swiss banks. Any entity can safely park undisclosed assets there and use it for their transactions. Even before globalization and liberalization set in, Indian entities had been managing to park money abroad. With the world economy opening up as never before and as a result competition for attracting money growing, the number of tax havens has increased, expanding across the world’s geography. Secondly, the entities might be apprehensive that should they declare any of their foreign assets, the information might not remain confidential and used by investigative agencies to probe inter-related transactions. So mum is the law. Now that the disclosure window is closed and the government sets about to enforce the stringent Black Money law, we will watch with interest how it breaks through the high wall of non-disclosure of foreign assets put up by most Indian entities, if at all.

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