Arun Jaitley on how Modi’s walking the talk on black money


The Income Disclosure Scheme 2016 (IDS 2016) has elicited a very large response. While the final declarations and the quantum of money disclosed are still being tabulated, the scheme resulted in over 64,275 declarants declaring an undisclosed income of over Rs 65,250 crore. The final figure is likely to be revised upwards. The average disclosure per declaration is over rupees one crore.

IDS 2016 was not an immunity scheme. It was a disclosure scheme. Immunity incentivises a non-compliant tax payer and allows him to pay lesser than a compliant tax payer.

Under IDS 2016, the declarant had to pay higher than the compliant tax payer. The average assets of each declaration belies the claim made by a Chief Minister that “small” people were being persuaded to make declarations. The object of the scheme was to try and make India a more tax compliant society. Tax compliance leads to higher revenues, reduction of budget deficits and money collected is spent on infrastructure, social-sector and the rural areas. This benefits India’s poor.

Prime Minister Narendra Modi has consistently taken a tough position against black money. He is now walking the talk. Some steps taken by the government are detailed here.

1. The first decision taken by the Cabinet was to accept the three year old Supreme Court direction to appoint an SIT. The UPA government had resisted the appointment.

2. The recommendation of the SIT to prescribe mandatorily the quoting of PAN number for cash transactions was accepted and implemented. This checks the end user of black money.

3. Certain tax frauds have been made predicate offences for attracting the PMLA.

4. The provisions of the Foreign Exchange Management Act (FEMA) have been amended in order to provide for confiscation of domestic assets in lieu of undisclosed foreign assets.

5. The Black Money Law has been enacted and implemented under which more than 644 declarants disclosed foreign assets worth Rs 4,164 crore and paid 60 per cent tax. Those who did not declare, are now detected, and will face serious penal consequences.

6. The law relating to benami assets has been completely overhauled to provide for confiscation of all benami assets.

7. Under the FATCA, the US law, an arrangement has been entered with the US for automatic exchange of information with regard to transactions by Indian citizens overseas. This provides for sharing of real time information.

8. The Double Taxation Avoidance Treaty (DTAT) with Mauritius has been amended in order to prevent round tripping of black money through the Mauritius route. Similar changes have been made in the DTAT with other countries.

9. An agreement has been signed with Switzerland and several other countries to provide for automatic exchange of information with regard to transactions and assets of Indian citizens.

10. Several other initiatives under Base Erosion and Profit Sharing (BEPS) with regard to country reporting have been undertaken.

11. In all the HSBC cases, where information has been received, assessment with regard to Rs 8,000 crore has been made and 164 prosecutions have been filed.

12. In disclosures made by the International Consortium of Investigative Journalists, Rs5, 000 crore has been detected as unlawful income of Indian citizens abroad and 55 prosecutions have already been filed.

13. In the Panama cases, investigations are at very advanced level and 250 references have been made to other countries with regard to unlawful assets held by Indians outside.

14. Investigations by Income-Tax authorities in the last two years have resulted in detection of undisclosed income of Rs.56378 crores.

15. IT capability has led to the detection of non-filers and recovery of Rs 16,000 crore as tax from the non-filers monitoring system.

All these steps are intended to persuade people to become more tax compliant. I am sure this campaign will result in India becoming ethically cleaner and more accountable. The officials of the Revenue Department and the CBDT who have worked on all the above initiatives, deserve to be complemented.

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