Black Money Bill: Advantages and Disadvantages

Black Money Bill: Advantages and Disadvantages

Question - Black Money Bill is the latest amendment to the Constitution. Critically evaluate the advantages and disadvantages of this Bill.

Advantages

• The Bill provides for stringent measures against violations; this includes property confiscation

• The Bill also provides deterrent through 10 years RI for tax evasion and penalty of 300 percent of taxes on concealed income and assets

• Moreover, the flat rate of 30 percent is taxed on undisclosed foreign income while there is no exemption against this under the IT Act 1961

• Magnitude of deterrent is also high. Concealment of income pertaining to foreign assets will be charged with penalty three times the amount of tax over and above the flat rate

• Inaction or failure to file returns with inadequate disclosure of foreign assets is also punishable by law under this Bill

• The Bill also makes concealment of income and evasion of tax pertaining to foreign asset a predicate offence which will allow enforcement agencies to attach and confiscate accounted assets held abroad

• Computation of tax liability on overseas property will be on the basis of current prices and not price required; this is a fair assessment

• The Bill also provides a compliance window for those who want to disclose their foreign income/assets stashed abroad

• The Black Money Bill will also put an end to fake transactions, tax evasion and undeclared possession of property abroad using tax payer’s money

B. Disadvantages

• Procedure to bring back Black Money has not been indicated in the Bill; it only prescribes punishment for those caught with black money or compliance window for those who voluntarily disclose their money/assets stashed abroad . More stringent laws are needed to punish the practice of stashing black money.

• Bill also does not address issues such as DTAA/Double Taxation Avoidance Agreement coming in the way of black money detection

• Bill is based on the premise that foreign assets and accounts are the principal source of black money; Global Financial Integrity estimates black money outside India to be only INR 28 lakh crore

• Domestic black money is a much bigger number and a larger problem; Black money stashed abroad is also brought back to India through round tripping of FDI via investment havens so domestic black money is much more

• The Bill also fails to provide a mechanism to retrieve information regarding the defaulters which has agreements with foreign governments

• Domestic laws and international treaty obligations blocking the detection of black money are also not addressed in the Bill

• The Bill also provides excessive powers to tax authorities without looking at the failure of tax administration in the nation. This includes assessing officers, ED, CBDT and others

• The Bill is not part of a holistic strategy to control the generation of black money

Facts and Stats

• India is third in the list of countries with black money stashed abroad

• India also leads in under reporting of exports; Rs. 6 lakh crore was hidden abroad from India in 2012

• Asia sent 40% of the developing world’s gross illicit outflows between 2003-2012 and India contributes 10% of it

• There is INR 4479 crore in bank accounts overseas that has not been accounted for alongside INR 14958 crore in unaccounted wealth being investigated by SIT