Ever since Modi took charge in May 2014, the opposition parties have been incessantly lambasting him for failing to redeem his promise [as they perceive it] of bringing the black money held by Indians in tax haven jurisdictions abroad and depositing Rs 15 lakh in the account of each citizen. Now, with general elections a few months away, the intensity of their missives has increased manifold.
The idea of every Indian getting Rs 15 lakh [for an overwhelming majority this is a mammoth amount] sounds like day dreaming. It is monumental absurdity. With so much money in his/her account, interest income @ 8% on this will be Rs 10,000/- per month. With a regular source of income assured [albeit without putting any effort], he need not work or look for a job.
For public used to a plethora of sops viz. free electricity, free water, free gas connection, heavily subsidized food and fertilizers, free laptops, free/subsidized education, subsidized homes and so on, now to give assured monthly income will tantamount to creating a cult in which people simply sit back home doing no work. With no one having to work, the economy will come to a grinding halt!
Modi, who is guided by the philosophy of empowering people, generating work opportunities and has orchestrated all his schemes [MUDRA Yojna, Jan Dhan Yojna, Start-up India, Skill India etc] to achieve this goal, could not be expected to do things [read: put Rs 15 lakh in every Indian’s account] which leads to an opposite outcome. So, what did he promise?
During his 2014 election campaign, Modi had targeted a spate of scams under erstwhile UPA – dispensation and large-scale tax evasion which led to generation of black money. A major chunk of this was stashed abroad which he promised to bring back. Further, to demonstrate the scale of loot and what would be possible if this wealth was brought back, he cited a calculation.
So, he mentioned Rs 15 lakh per citizen. It was illustrative and by any stretch of imagination not intended to mean that every Indian would get the money. Yet, it has been misinterpreted [willfully] only to extract political mileage.
Instead of getting swayed by the figure per se [how much money came from abroad and deposited in individual account], Modi has to be tested in terms of his actions to deal with the issues that he raised during election speeches. Free from rhetoric, the issue calls for a dispassionate and objective analysis.
Within a week of assuming office, Modi – government complied with the directive of Supreme Court [SC] to set up a special investigative team [SIT] to unearth black money by initiating investigation,proceedings and prosecution in specific cases [in contrast to erstwhile UPA dispensation dodging SC orders for 3 years]. The SIT was also mandated to work out a comprehensive action plan to create an institutional structure that would enable the country fight the battle against unaccounted money.
Modi pulled out all stops at the diplomatic level to get information regarding illegal wealth kept by Indians in foreign banks. In the meeting of G-20 finance ministers in Cairns [Australia], he played a proactive role in enabling approval of mechanisms for cooperation in regard to exchange of such information. It also entered in deep engagement with concerned countries. The efforts yielded positive outcomes.
In Switzerland – the most sought after tax haven jurisdiction – Swiss Federal Council [SFC] adopted in October, 2014 definitive negotiation mandates for introducing the new global standard for automatic exchange of information [AEOI]. The information relates to bank account balances, interests, dividends, other financial income and data on beneficial owners of trusts.
India has already started receiving information under AEOI route under FATCA [Foreign Account Tax Compliance Act] from USA in 2015. By 2018, the number of foreign jurisdictions – including those which have beneficial tax regimes – reached 100. In the near future, the AEOI is expected to cover all countries.
In 2015, the government passed the Black Money [Undisclosed Foreign Income and Assets] and Imposition of Tax Act. Under it, a person having ‘undisclosed’ income and assets in a foreign country/jurisdiction has to pay in addition to 30% tax, penalty equal to 3 times the tax or 90% and face prosecution leading to jail which could go up to 10 years. Failure to file returns of foreign income/assets or give incorrect figures attracts imprisonment up to 7 years in addition to tax and penalty. The offences cannot be compounded.
The government has also revised tax treaties with safe haven jurisdictions such as India-Mauritius double taxation avoidance agreement [DTAA] to plug loopholes and bring tax treatment for investors from there at par with domestic investors. This helps reining in round tripping of Indian black money.
These legal-cum-institutional measures coupled with timely flow of information have a laid a solid foundation for bringing back black cash stashed abroad. Besides, a person will think ten times before daring to transfer such funds abroad.
Team Modi has also enacted other laws such as the Fugitive Economic Offenders Act [FEOA] and Insolvency and Bankruptcy Code [IBC] which expedite the recovery process. The FEOA enables the investigation/prosecution agencies to seize all assets including foreign assets of an offender and dispose off to realize dues from them without being hamstrung by courts. The IBC drives defaulter/borrowers to return lenders funds’ including money diverted/siphoned-off due to fear of losing control over their companies.
Furthermore, the government has taken steps to rein in corruption and generation of black money. It has amended the Prevention of Corruption Act [PCA] [1988] to plug all loopholes and make it effective. Likewise, it has made amendments in the Benami Transactions (Prohibition) Act [1988] to make it bite. Under this Act, already assets/properties worth tens of thousand crore have been seized.
Above all, by bringing about reforms, making governance policy driven and ensuring transparency in various processes, he has unclogged most of the ducts/compartments that breed corruption and lead to generation of black money.
Modi has done all that is needed to combat black money. While, critics will remain obsessed with 15 lakh [as it suits them politically], the public must not loose sight of his ‘commitment’ and ‘genuineness’ of the efforts being made by him.