Dear Jaitley, Don’t Undermine Your Own Black Money Law Of 2015

Dear Jaitley, don’t undermine your own black money law, 2015. Here is what you should do before implementing the 2016 scheme.

The tax amnesty scheme enshrined in the Finance Bill, 2016 is at odds with the black money law you put on the statute books in 2015. That law won a lot of acclaim from the cognoscenti, given the fact that it reads the riot act to the crooks – if foreign black money is discovered by the government on or after 1 April 2016, the offender will have to cough up a 30 percent tax plus a penalty of 90 percent thus making a grand tally of 120% impost.

Skeptics call this a paper tiger, but the world order is changing, and the OECD has given a foretaste of it by taking a proactive lead in the matter of Base Erosion and Profit Shifting (BEPS) practiced by the multinational companies. The OECD is likely to toughen its stand on nations offering themselves as sanctuaries to crooks.

Where you erred while making the black money law of 2015 was in making it foreign-black-money-centric. Indeed, the 2015 scheme that presaged the tough law and gave the crooks a one-time opportunity to come clean with their assets secreted abroad failed because of this obsession. Black money moves out and enters India through subterranean channels with surprising speed, so much so that it is very difficult to put a figure on the illicit wealth stashed away abroad by Indians.

The assets built abroad through over-invoicing of imports and its concomitant kickbacks might have foreign origins, but businessmen move the money into India through hawala channels, knowing as they do that it can be put to better use in India after duly laundering it. And the black money made by politicians and bureaucrats through corruption might have Indian origin but move back and forth from India depending upon the usability factor.

You very well know how black money of both hues lubricated the Indian bourses through the process of round-tripping. I don’t have to labour on this point. You of all people should know that black money is fungible and defies location. Contrary to popular notion, they don’t stay stagnant at the formidably secretive Swiss banks.

The black money law of 2015 is a very good piece of legislation, unbeknownst to the nation till then because the early schemes were not only evanescent but also amnesty in nature. This one is permanent and would be effective if it targets the Indian black money as much as it targets the foreign.

Once you do so, launch the 2016 law by all means if you have to as the last opportunity to return to the path of rectitude. It would be a success because crooks would settle for a 45 percent tax rather than a steep 120 percent impost if caught later on. It would not invite derision like the last-opportunity refrain of the earlier schemes if you swiftly up the ante and catch the crooks through superior financial intelligence gathering.

Rahul Gandhi took a potshot at you by calling the 2016 scheme a “fair and lovely scheme”. He would have to eat his words if the scheme is preceded by toughening of the black money law of 2015 in the manner suggested above.

It would also silence critics who have been taunting your government ad nauseam, asking “where is my Rs 15 lakh?” You can tell them confidently that the 2015 black money law has sharp enough tentacles to catch black money of all hues, including the money made through numerous scams by former UPA ministers.