Various Governments since Independence have attempted to bring to mainstream the Parallel Economy-often referred to as Black Money. Instead of addressing the issues that help generate the Black Money, the various Governments have only tried to have their share by imposing taxes at differential rates under the various schemes named by the then government of the day. Starting with the VDIS Tyagi Scheme in 1951 to the present one named as Income and Assets Disclosure Scheme have all attempted to regularize the habitual irregulars.
In the bargain, the Government has rewarded the wrongdoers at the cost of the taxpayers whose taxes have been deducted at source and others who have complied with the system with utmost sincerity and honesty. Compare a situation of a taxpayer who has failed in his duty to pay the taxes that he is required to pay for over a decade.
Now there one other taxpayer who has paid all his dues on a regular basis. The one who has not paid the taxes has had compounded growth of the taxes evaded- the black money- and now when he is required to pay under the various schemes it is only a fraction of the amount actually due.
“There are sufficient revenue laws, with necessary controls in them but their implementation has been very weak due to many factors. Even then, there is clamor that the rate of 45% is very high under the new scheme, which is to come into force from 1st of June, 2016. It is a situation of the pot calling the kettle black,” voiced a taxpayer.
The successive Governments have failed to take follow-up measures that would have ensured that the black money is curbed to a great extent. The voluminous growth of black money and the boasting from the Government of unearthing the same is something to laugh at.
In real terms, the amount of black money unearthed today and would be a lot less than what was unearthed in 1951 on absolute terms. The cost of one kg of silver today is around Rs.41000/- whereas that in 1951 would have been less than Rs.100/- a kg. It simply translates into dividing the figures put out by a factor of 410. So when the government says that it has unearthed Rs 71000 crores it equates on purchasing power basis to roughly about Rs.173/- crores.
The root cause of the problem is the generation process, which is well oiled and smoothly functioning. The complicated tax laws without any coherence among them has been the root cause of the problem. Various revenue laws are interlinked and they are intertwined but they function in watertight compartments.
For instance, the returns filed under the VAT Act and Service Tax law generally translates into revenue for most of the taxpayers who have income under the head income from business or profession. Then there is a need that these agencies coordinate and co-operate amongst themselves. The Parthasarathy Shome committee has recommended the same but it is still to be implemented. Not only that while applying for loans that financial statements given to Bank and other Financial Institutions are grossly in variance to the one filed under the revenue laws. Why are such variances not investigated into?
Having brought to light the issues concerning the generation of black money it definitively requires the Government of a day to take steps to curb its growth. With the growth in the economy, unless the process that generates unaccounted income is curbed there would be exponential growth in the generation of unaccounted income.
It would require a great degree of political will on the part of the government to see to it that the revenue laws are properly complied with increased use of digital technology and increasing the habit of banking among the people. Black money is a social evil that ruins the entire fabric of the nation by increasing anti-social activities and increasing the cost of the product. The government, in order to generate revenue, would play with the tax rate and it is generally seen that the rates move northwardly only.