Is it not a comedy of errors when a Finance Minister, so eloquent and poetic in his budget speech, forgets to commit another malapropism while assigning a name to his dream scheme of converting indigenous black money into white?
In his understandable anxiousness to wake up sleeping Vikash and bring the astronomical amount of black money circulating in our country in the account books, he resorted to a magic trick unmindful of its future consequences. The government in his mindless magnanimity announced ” a limited period Compliance Window for domestic taxpayers to declare undisclosed income or income represented in the form of any asset and clear up their past tax transgressions by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income.” No scrutiny or enquiry regarding income declared in these declarations under the Income Tax Act or the Wealth Tax Act was proposed and the declarants were also promised immunity from prosecution.
Immunity from Benami Transaction (Prohibition) Act, 1988 was also proposed subject to certain conditions. The window under this Income Disclosure Scheme is to remain open from 1st June to 30th September, 2016 with an option to pay amount due within two months of declaration.
NOT AN AMNESTY?
Strangely enough, the honourable Finance Minister was at pains to argue that ” it is not a VDIS (Voluntary Disclosure of Income Scheme) and it is not an amnesty. Inequality arises in amnesty, that on a certain income, you as an honest tax-payer have paid 30% and you come after 20 years and say that I would also pay 30%. This is not structured that way. You pay 30% tax and 7.5% surcharge, and another 7.5% penalty, which is 45%, ending up paying 1.5 times more. So, you are paying penalties for not paying tax in time.” Why this eagerness? In fact, it was to circumvent the Supreme Court ban on such Amnesty schemes.
At the time of VDIS in 1997, a petition was moved in the Supreme Court by the All-India Federation of Tax Practitioners, stating that such a practice was discriminatory against those who paid their taxes regularly and dutifully. To get over this valid objection, the government had to give an undertaking to the Supreme Court that the VDIS was the last of its kind, and it would not bring about such schemes in future. Any future scheme, thus, required prior approval from the Supreme Court. Hence, even the earlier scheme of this government, the “Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015”, was called a “Compliance Window” and the government was at pains to explain why such a window was not an amnesty scheme.
A MONEY BILL?
Further, a government, not sure of strong footings of the Scheme, got it passed as Money Bill in the Lok Sabha. Why? Because a Money Bill is not required to be passed in the Rajya Sabha. So, rather than face problems in getting it passed in the Rajya Sabha where the present government is in mionrity, they in their eternal wisdom called it a money bill. The Speaker of the Lok Sabha, who has the last word in the matter, also had no hesitation in accepting it as a Money Bill !!!!!!!!!!!
THE MATHS GOES WRONG?
Leaving all arguments aside, let us test mathematically the government’s premise that the scheme is not structured in favour of tax-evaders. Let us consider the case of a tax-evader who does not pay income-tax on an income of Rs.100/- and uses it as capital to further generate income @10% per year. At the end of 5 years, he would have earned Rs.61.82 as income , which he would have spend as black money. And suddenly if the conscience dawned on him after hearing about the government scheme for changing black money into white, he would be able to get away with paying Rs. 45/- as income tax. And the government has guts to say that the Scheme is not structured in favour of tax-evaders!!!!!!!!!!!!!!!!
WHOM ARE YOU FOOLING?
Is the only objective of the government to collect taxes? How will the the government ensure that the black money declared under the Scheme did not accrue from smuggling, sale of narcotics, prortution, gambling, bribes and other illegal activities? Any answers? The Global Financial Integrity, in its report, ‘Illicit Financial Flows from Developing Countries 2004-2013’ has estimated that illicit financial flows out of India for the period 2004-2014 were to the tune of $505 billion i.e. around Rs. 35 lakh crores. Recently, the Supreme Court appointed SIT directed the Directorate of Revenue Intelligence to verify the veracity of the report. The matter is still under investigation. It is, therefore, high time the government becomes serious about the black economy before it is too late.
By Vimlesh Kumar
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