Black money bill is bad. We tell you why.
Loksabha has passed the so-called Black money bill. The formal short name is Undisclosed Foreign Income and Assets Bill. While no one can question the basic intentions behind the bill, it is sad this bill too follows numerous others that simply complicate the matter, don’t solve the problem and in fact make it worse in many ways.
Incidentally many of these points were also raised in an excellent speech by Deepender Singh Hooda, Congress MP from Haryana, during the LS debate on the bill.
Problems with the Bill
There is no need for a separate bill, IT Act is there already
There are over 85 sections, with numerous clauses and sub-clauses in the bill. This will delight many lawyers and Chartered accountants and ITOs but will be a nightmare for ordinary people. For all that, it accomplishes nothing that’s not already there in the IT Act or can be inserted in one paragraph.
Is it legal to not disclose income, whether local or foreign? Of course not! It is legal to hold assets in India or overseas out of income not taxed at all? Of course not! As Mr. Hooda rightly pointed out, such disclosures (and penalties) are already there since 2013. Then what good does this law do? Your guess is as good as mine!
Vaguely defined ‘satisfactory explanation’ clause gives ample scope for harrassment
The law says overseas assets held by resident taxpayers (NRIs thankfully exempt, but more on that later) for which ‘no satisfactory explanation’ can be given. Now who’s to be satisfied? ITO of course. What is ‘satisfactory’? No one knows.
Obviously for rent seeking corrupt ITOs, or those simply desperate to meet quotas and targets or earn promotions, it is very easy to issue a demand notice claiming to be unsatisfied. This is even for assets properly disclosed!. The poor taxpayer then has to fight the system or go to jail. At best he can waste months and years of effort, huge fees to accountants and lawyers before he can escape the law. And what penalty applies to the crooked officer that started the whole process? Nothing of course.
This is exactly how foreign investors end up with irrational, huge tax demands on MAT and other matters, often running into tens of thousands of crores of rupees (of which nothing is really collected) after years wasted destroying India’s investment climate, image and economic prospects. Once the law is there, the rules are, it will be physically impossible for any FM, however smart or well meaning, to stop abuse.
As with Section 498A and so many other laws, this will be misused to generate fees and bribe. And there will be no control other than goody goody assurances by the Hon Finance Minister which can be written in a sheet of water.
Big blow for NRIs, a community that supported NaMo consistently
Even though NRIs are exempt, many that plan to return to India will have to think twice. This is because a crooked corrupt ITO can simply dismiss their explanations and seek to levy 120% tax on whatever assets they disclose upon return, simply alleging he is ‘not satisfied’ with the explanation. And become a hero internally for standing up for the exchequer. Either you pay through your nose in bribes or be prepared for years of court battle.
Most of the income earned from such wealth is taxed somewhere or the other and it is likely to be eligible for double taxation relief. Most countries, other than few like Singapore or Hong Kong that attract legitimate wealth through well run capital, property and other markets, have high tax rates. This means, nothing much will flow to the Indian Government anyway. This is because such tax is only due if the tax paid overseas is less than Indian taxes.
Easy for real big fish to escape the law, even legally
Anyone with substantial overseas income or assets, that too earned illegally can easily ensure one of his family member is a NRI and keep all wealth in his / her name. It is so easy to purchase such residences in numerous nations, perfectly legally. It will be impossible to go after such individuals. In any case these people are not going to declare assets in any return and if by some miracle the IT can find them and prove the case, they can easily do so without this law as well, under existing Income tax laws.
Doesn’t help with vast amounts of black money inside India
That should be clear from the title of the bill itself. But then our minister has a fantastic cure! Another law, presumably of equal length, complexity and viciousness will be enacted for that! I can see many ITOs and CAs licking their palms in anticipation!
Doesn’t address the structural issues that help generate black money in the first place
Some of the structural issues have been addressed, although slowly and over a very long period of time. Ridiculously high tax is obviously the first one. We had urine drinking morons running this country that argued 98% tax is ‘reasonable’. Thankfully today they are a lot better.
But there are many other sources of black money – the mining, real estate (land), government contract sectors together will probably account for 90% of the black money generated. If nothing is done to stop this, the money will sure find a way to end up in tax havens abroad. If the government does reduce the generation, it will find that such draconian laws are completely unnecessary.
Reflects sad state of Indian politics in general. Draconian laws too easy to pass. Real solutions never found
It is the same with so many other laws, be it anti-dowry, anti-harassment, anti-Dailt atrocity etc. Draconian laws get passed because no one dares to oppose them and risk tarred with a black paint. They then become nuclear weapons in the hands of corrupt cops, officers, lawyers and others who simply use them to generate revenue.
Many lawyers openly confess that their first advise to any woman coming with a divorce case is to file a Section 498A complaint. The cops then merrily go and arrest anyone and everyone they can find, including mothers, grand mothers, uncles, aunts and relatives. This then generates huge revenue for them, lawyers from both sides as well. Little wonder when attempts to dilute the section were made, the biggest howls of protest came from lawyers! It is almost similar story with the ‘atrocity against Dalits’ Act which shifts burden of proof to the accused! Just last week a judge of the Chennai High Court threatened to use this very act against his own fellow judge, that too the Chief Justice, for difference of opinion over a routine matter of appointments, underscoring the ridiculous extent to which this law has been misused.
While Mr. Hooda and Shashi Tharoor made good speeches, they could not bring themselves to vote against this bill. Just as BJP had trouble voting against the ‘draconian’ land bill they are desperately trying to dilute now.
A big blow to the pro business pro middle class image of Modi regime for little electoral benefit
Forty plus years of Nehru/Indira Gandhi style socialism and the ridiculous nonsensical laws, rules, notifications and regulations as well as paperwork spawned by them have spoiled India’s image as well as its investment and social climate for long time to come. It has also kept generations of Indians poor and deprived. Many educated Indians were hoping for big things when they enthusiastically endorsed Narendra Modi and his vision.
In this context, it will be good if Mr. Modi and Arun Jaitley sit together and think carefully about such bills and their impact on their own image as well as India’s.
They may find that it is better to expend their enormous energies elsewhere.