Voluntary disclosure of Black Money

Voluntary disclosure of Black Money
Voluntary disclosure of Black Money

PerformanceGurus Staff

New Delhi

The government’s efforts to persuade economic offenders to voluntarily declare their black money has turned out to be a major flop as only of ₹3,770 crores ($575 million) was received from 638 individuals under the one-time black money compliance window. The compliance window opened on 1st July, 2015 and closed on September 30. The sum declared under the amnesty scheme is a like a drop in the ocean as tax evaders are estimated to have stashed billions of dollars abroad as per various reports prepared by different agencies.

The government had launched the voluntary disclosure scheme in line with its avowed commitment to bring back black money kept in foreign banks. The issue of black money has been subject of a bitter political blame game with the Bharatiya Janata Party (BJP) accusing the Congress of doing precious little in the past to tackle the menace and the Congress ridiculing the Modi government for failing to keep its promise to bring back the illegal wealth from foreign banks. Even in the ongoing campaign for the Bihar assembly election, the issue of black money is hogging the limelight.

In such a backdrop, the meager declaration made by the offenders will come as major source of embarrassment for the Government , which will be under pressure to track the economic offenders and seize their illegal wealth.

“If it is known that there is some wrong or no filing by a person holding black money, then the accountability rests with that person. If you do not use the (one time black money declaration) window, then we assume that you deliberately hid your foreign asset. When you avoid law then all consequences of law should follow…”

– Chairperson of Central Board of Direct taxes Anita Kapur, to PTI.

She said the Board was beefing up its information gathering mechanism in both the domestic and international arena to create the “capacity to catch hold of such people who are spoiling country’s tax compliance culture.”

In a statement the Finance ministry said on Thursday that, “638 declarations have been received under the compliance window declaring undisclosed foreign assets amounting to ₹3770 crores. These figures are subject to final reconciliation.”

The statement said that tax at the rate of 30% and penalty at the rate of 30% is to be paid by December 31, 2015.

“Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the Act) has been enacted to deal with the menace of black money stashed abroad. The Act also provided for a compliance window for a limited period to persons who have undisclosed foreign assets which they had not disclosed for the purposes of Income-tax so far,”

– Statement by the Ministry of Finance

While estimates vary on the quantum of black money deposited by the Indians in foreign banks, an international think-tank recently pegged the amount to a staggering $439.59 billion (₹2,800,000 crores). According to the Washington-based research and advocacy group, Global Financial Integrity (GFI), this amount flowed from India to foreign banks over a ten-year period from 2003 to 2012.

The report placed Russia on the top followed by China in terms of the quantum of black money moving out of a country for 2012 — the latest year for which these estimates have been made. Of the $991.2 billion worth illegal capital that flowed out of all developing and emerging nations in 2012, India accounted for nearly 10%. The illegal wealth flowing out of the country is allegedly linked to crime, corruption, and tax evasion.

As per GFI’s 2014 Annual Global Update on Illicit Financial Flows report, the total illicit outflows from developing economies for ten years between 2003 and 2012 was estimated at $6.6 trillion. In these ten years, an average of $43.96 billion of black money moved out of India every year, the GFI report said.

A Special investigation team set up the Supreme Court of India is tasked to ascertain the amount of black money and ensure repatriation of black money stashed abroad by individuals and corporates.

1. The conversion rate used is 1 US Dollar = 65.58 Rupees

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