Sunday, February 12, 2012

The new black

The Indian Express : Mon Feb 13 2012, 00:21 hrs
Joshi panel report on black money is full of anti-corruption rage, but has few new suggestions

In our current discourse, black money stands in for much more than what it is — it is shorthand for moral rot, political complicity and India’s rightful earnings being diverted to foreign locations. Wild figures are flung around about the extent of the black economy. Opposition leaders and spiritual gurus demand all the black money stashed in Swiss accounts be repatriated. They seem to suggest, incredibly, that the ratio of black to white is worse now than in the pre-reforms period — now, when tax rates are at near-international levels, when tax fraud is easier to track, and when there’s far greater reason to set the money to work in India than mouldering in a Swiss account. In any case, the government, facing political heat on black money, appointed a committee in June 2011 under former CBDT chairman M.C. Joshi to study the problem. It has now prepared a 160-page draft report — long on rhetoric and idiosyncrasy, short on actionable goals.

Much of the report is padded with generalities about corruption, which it says cannot be considered “less diabolical than money-laundering or commercial production and sale of illicit narcotics”. It demands corruption be punished along the same lines — 10- and 20-year punishments, and a second serious offence punishable by death. It urges the Lokpal be enacted and public policy be designed to encourage savings and frugality. It tentatively suggests an amnesty — saying the government may consider a compliance scheme, with reduced penalties and immunity from prosecution, to bring back money from abroad. Twenty years after reforms, with lower tax rates and an improved environment for compliance, it is surprising that this should still be a last-ditch measure.

It has focused on some clearly needed fixes — calling for the GST regime to be put in place, and for the national tax tribunal to deal with related litigation. Black money exists because of certain structural problems — if those are not worked out, no maximalist law will improve matters. The report has rightly pointed to real estate as the central generator of black money, and called for stamp duties to be rationalised, circle rates to be updated, etc. It has also underlined that election funding is a major fount of black money. However, instead of offering a constructive agenda to tackle the specific facets of the problem, the report is largely content to decry corruption and offer some warmed-over advice.

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