The Centre’s move to mop up black money from the economy by giving taxpayers amnesty to declare undisclosed past income by paying tax on it at an effective, slightly high rate of 45 per cent has yielded a surprisingly positive dividend.
The four-month window granted for evaders to come clean opened sluggishly, but eventually over 64,200 assessees disclosed undeclared assets worth at least Rs.65,250 crore.
Stern warnings from the Prime Minister himself about tough action and possible jail terms for those who failed to declare their ‘cartloads’ of black money may have added punch to the Finance Ministry’s pitch.
The haul is considerably higher than the Rs.4,164 crore in assets and black money held abroad disclosed under a similar arrangement with a higher tax rate in 2015. This time, the tax department rightly focussed on demystifying and propagating the scheme, so potential beneficiaries were reassured that they would not be persecuted.
The almost Rs.30,000 crore in taxes being raked in provides a cushion for the Centre on the fiscal deficit management front since it hadn’t set any explicit revenue expectations from the scheme.
The final stocktaking is still on, so the record collections under this scheme, vis-à-vis similar endeavours in the past, could rise further.
The Centre, however, must not consider this the end of its campaign on black money. To put things in context, the average undisclosed income per taxpayer under the scheme stands at Rs.1.01 crore; and though the disclosures are nearly double those in the last income amnesty scheme (around Rs.33,700 crore), nearly two decades have passed since then, making comparisons misleading.
The tax department is aware that Rs.65,250 crore is just the tip of the iceberg — it had sent seven lakh letters to suspected evaders based on information on about 90 lakh high-value transactions that took place without PAN card details.
The tax department must crack down on such evaders and spruce up its data-mining methods to expand the country’s shallow tax base. While the department’s efforts have revealed undisclosed income of over Rs.58,000 crore in the last two and half years, and more is being pursued from tax havens where Indian holdings have come to light, all of this is akin to treating the symptoms without addressing the root cause.
If the Centre is serious about attacking India’s thriving black economy, it needs to be bold and, for starters, make electoral funding transparent, curb the misuse by the wealthy of tax-free income sops for farmers, and encourage cashless transactions.