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Black money haul: Experts credit govt with strong execution

Finance Minister Arun Jaitley today declared that as much as Rs 65,250 crore had been declared under its Income Disclosure Scheme (IDS), a one-time amnesty scheme under which concealed income could be legitimised.

The move, which earned the government about Rs 30,000 crore at a 45 percent rate, was the first such scheme since P Chidambaram’s Voluntary Disclosure of Income Scheme in 1997.

In an interview with CNBC-TV18, experts talked about why the scheme was executed well and why it is important in the face of the rollout of the goods and services tax.

‘Govt should be credited for execution’ – Dinesh Kanabar, CEO, Dhruva Advisors

This an outstanding success. It should not just measured by the quantum of declaration. The government is showing a determination that it wants to curb the use of black money. It is probably for the first time in the history of this country that a prime minister has stood behind a particular scheme. We have finance minister, the entire machinery going all over the country to see that people make a declaration.

There is absolutely a recognition in the marketplace that the government is serious about what it is talking. We have regulations regarding mandatory use of permanent account numbers (PAN) for transactions etc. So people know that the avenues of using black money are getting narrower and narrower. This confining everything into the mainstream is very welcome.

Last year we had overseas declaration scheme and that scheme did not meet the success that it ought to. The total collections or the total declarations were of the order of about Rs 5,500 crore and since the rate of tax was 60 percent, the total collections were of the order of about Rs 3,300 crore.

There was something which did not go right with that scheme as much as it ought to because the number of clarifications that came in there came towards the fag end of the scheme.

As a result of which people were not sure as to whether their identity will be protected, whether they will be subjected to any further prosecution, harassment and all the other stuff. The last of the clarification came just four days before the scheme ended.

Contrast that with the current scheme where all the clarification has started to come in from day one. The government was with one voice to say that here we are, we are going to give you all protection from any information being leaked etc — a number of clarifications including the clarification that even if you don’t have a PAN and you apply for it, your declaration would be accepted.

Therefore, while one can keep on speculating as to how much of the black money sits in India compared to what sits overseas, the fact of the matter was that the scheme was absolutely implemented right compared to probably what could have been a much better implementation in the earlier scheme and therefore. It just shows that where the government sets itself right, put its mind behind something, it is bound to happen.

‘GST rollout will boost fight against black money’ – Rohan Shah, Managing Partner, ELP

The response to the scheme gives great credibility to the whole objective that the government had.

The government is moving towards the goods and services tax (GST) with great ferocity and all of these are ultimately about bringing more and more people and more and more transactions into the stream of legitimate business transactions. It will ensure that you have the evolution of the common market, evolution of an economy which is completely above the board and is completely accounted.

So when you put these two things together and I think the common thread is the intent of government — government has on both fronts excelled itself in terms of how it has pushed forward its agenda. That, more than the number, augurs very well for the future.

‘Easier to fight black money here than abroad’ – Rohan Shah, Managing Partner, ELP

The one factor that you will always have to play in is the factor that to the extent that you have somebody who is affected in India who intends to stay in India, the rigour of the law is going to visit them far more easily than somebody is overseas because even internationally and given everything which has been mentioned we have seen that there are certain individuals who are outside of the Indian system and whatever we are trying to do to impose the law in them, it is not happening because the process internationally is clearly just not as easy.

You have a series of steps to go through and most of them are under international treaties. So you are in a way going to create a far greater persuasion on anyone who is within India, who is within the system, who has assets in India as opposed to somebody who is outside the system because that distancing just is something where the bridge is a legal bridge and it takes its own time in terms of how it is going to work out. So you are going to have this greater impact here.

The bigger fight is here but [globally] there is a greater universal force which is going to attach not only to Indians but anybody who is dealing with black money or transactions which are not tax-paid. You will see another phase where people will become more compliant but right now, the greater fight is here and our greater persuasion is also here.

‘Those who haven’t declared don’t realise the implications from GST rollout’ – Sachin Menon, COO Tax & National Head of Indirect Tax, KPMG

I don’t know that whether everybody understands what is the implication of not declaring. Once the GST comes into being, almost all the transaction of the people who are doing business and not declaring will come into the fore because it is not easy for any of the tax payer to hide those transactions. GST is envisaging that every transaction from the source, whether it is an inboard transaction or is a local sales or inter-state procurement, all of them will be passing through the GSTN network. So, supposing somebody is not disclosing the income today, now suddenly in the next year you will find a surge in their income because there are few avenues for them to do business without getting through the GSTN network.

So, it is a greater danger perhaps which is lurking there that those who have not declared will have to explain how their income suddenly surged in the year of introduction of GST. This is one of the reason perhaps people might have felt that they should declare that now. Those who did not understand this perhaps might not have done this, I would say that had this was known to the people, the success of collecting the amount would have been far more greater.

‘A good start. Government has sent the right message’ – Arun Giri,

There are hundreds of commissioners, 15 chief commissioners in Mumbai alone, which contributes 40 percent of India’s tax revenues. That entire machinery was put behind the IDS scheme. Most officers went home at the stroke of midnight yesterday. There were several of whom, who were making last minute phone calls. So, the sort of pressure that was exercised to make this scheme a success was quite stunning to say the least.

Therefore when you have this entire machinery of the government, the machinery of the revenue department going to make the scheme a success, I think Rs 60,000-65,000 crore is reasonable.

As far the fight on black money, the sort of figures, look at when the BJP campaigned in 2014 general election, the sort of figures everyone was talking about as regards to black money and what has been declared, no one would say it is even a fraction.

However it is a good start. I think the sort of psychosis, I would not say fear psychosis but if you look at the number of surveys that are being done, the message from the Prime Minister, Finance Minister, Revenue Secretary, CBDT Chairperson, one common message – come clean or we come after you – that message seems to have made this scheme a success. Somewhere the fear internally that if we are caught then what?