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Govt moots one-time tax amnesty to recover black money stashed abroad
-The Times of India

The government's white paper on black money, tabled in Parliament on Monday, listed a one-time tax amnesty to recover funds stashed abroad and a gold deposit scheme for locals as possible ways to deal with the menace, while suggesting that individuals get the tax department's go-ahead for all property deals and face undue scrutiny on cash in their possession.

It also called for setting up of independent regulators, ombudsmen for allocation of natural resources, as well as Lokpal and Lokayuktas.

The document has been prepared in response to the clamour for crackdown on corruption and unaccounted wealth, and is supposed to help the government counter the perception of inaction that has bruised it politically. However, in its anxiety to appear tough, the government tilted towards prescriptions which can set the clock back on tax reforms and result in harassment of honest taxpayers.

Amid ramblings on how undisclosed income is generated - from stock markets to foreign investment and real estate - the underlying theme seems to be more power for taxmen, known for using their discretionary powers to make life tough for the honest taxpayer.

With the political context - as evident in BJP and civil society activists launching a campaign for retrieving black money routed abroad -- rendering he possibility of a tax amnesty rather slim, the prescriptions read like a bland compendium of suggestions that have been bandied about since at least the 1960s.

There are of course suggestions that incentives be given to promote the use of plastic money and financial instruments other than gold, which is seen as a key sector generating unaccounted income. Similarly, an oversight for auditors has been mooted to scan corporate balance sheets effectively.

On the whole, the paper is replete with many proposals which are politically unfeasible; in some instances even glaringly at variance with the government's stated position. On the issue of controversial participatory notes, instruments used by foreign institutional investors, the report has cited it as a source of generation of black money, something that the government has often denied.

"...in view of the fact that the jurisdictions in which the persons to whom PNs are issued are not only countries such as the UK or USA but also well-known OFCs (offshore financial centres) such as the Cayman Islands, British Virgin Islands, Switzerland and Luxembourg, it is possible to hide the identity of the ultimate beneficiaries through multiple layers which is also evident by going through the orders passed by Sebi in some cases. The ultimate beneficiaries/investors through the PN route can be Indians and the source of their investment may be black money generated by them," the white paper said, and went on to list potential manipulation of stock markets as one major area of concern.

Even the emphasis on "appropriate price discovery mechanisms" for natural resources, when juxtaposed with the presidential reference on SC order mandating auction as the sole basis for allocation of natural resources, appears to point to a disarray in government over the issue.

Although the report tabled by finance minister Pranab Mukherjee mentions that the liability of Swiss banks to Indians has dropped from Rs 23,000 crore in 2006 to Rs 9,300 crore in 2010, it cited the experience of the US, the UK and other European countries in getting black money stashed overseas through voluntary disclosure of deposits.

"In these schemes, only partial benefits in the form of immunity from prosecution were made available in lieu of voluntary disclosure, as taxes along with lumpsum interest and penalty has to be paid," it said but also pointed out that such schemes have posed a "moral hazard".

"In recent years, the general public sentiment is also perceived to be against giving any immunity to tax evaders who have parked their money outside India. While such schemes help in recovering some of the lost tax revenue, their overall feasibility needs to be assessed in this background."

Even in case of the suggestion on a gold deposit scheme, with a nominal return, the issue of complete tax immunity is something that the government is wary of.