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.
Recent Posts
Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.