Tackling the Black Money Menace
India’s black money problem has been largely misdiagnosed with the legislative measures in addressing the black money falling short. The Black money act which was aimed to bring the unaccounted money parked as overseas assets was able to accomplish only 5% to 10% of what was expected of it.
With a minimum tax rate of 60% it only gave little incentive for the hoarders to come clean. Lawmakers had overestimated the writ of international laws and did not make an economically persuasive case resulting in the total untaxed forests assets at Rs. 12500 crore in May 2019. Instead of mending its ways, the Government passed the Fugitive Economic Offenders Act.
Demonetisation was aimed at fighting the black money menace, however it has been called as a massive theft of people’s property. Similarly, announcement of Rs. 15 lac in each citizen’s account was nothing more than a political stunt.
There was no clear estimate of black money owned by Indians and abroad. There were various reports between 2008 and 2012 which quoted the amount of black money between $500 billion and $1.5 trillion. However, these reports turned out to be false. In summary, India’s black money problems were misdiagnosed. A fiscal system need to have not just legality but also legitimacy. A system was loose its legitimacy with a breach of faith between the government and the taxpayer.
The goal of the Black Money act and the Fugitive Economic Offenders Act could have been achieved via amending the existing laws of the Income Tax act. The concept of being an intrusive pressurising confiscator clearly does not work. It is with increased international cooperation, technological advances and deep banking penetration the war on black money can be won.