Editorial
Whitening black money
Morally indefensible, seems economically unsound, too
It is not surprising that the budgetary proposal to allow whitening of black money has drawn flak from different quarters. Though the Finance Minister has said, "Politics is the highest art of compromise", critics wonder whether this is not a compromise at the altar of political expediency. It is difficult to see how the economic dividends sought to be derived from the proposed move could actually accrue. The past experience with granting similar extraordinary concession leaves us wondering what gain had accrued to the public exchequer previously so as to justify a recourse to it again. We are in the dark about the extent of money thus recovered and invested in the productive sector through such a move in the past.
According to the proposed provision, black money owners will be able to legalise their undisclosed incomes for the next three years by paying 10 percent tax on the disclosed amount, and by investing the legalised money in the industrial sector, capital market and in purchasing flats.
Our apprehension is, since a three-year period is allowed for disclosing shady incomes, the economy might continue to have a malcontent of black money for two years because the owners could opt to declare their money only in the third year, that too, with no questions asked. It might as well discourage honest taxpayers to pay taxes regularly. Instead, they might like to hold on to their money till the third year to pay taxes at a concession rate of 10 percent. It seems, therefore, that by requiring the genuine businessmen to pay tax at 20 to 25 percent rate and allowing black money holders the concessional rate of 10 percent, the former are given some kind of punishment while the latter get rewarded.
The Metropolitan Chamber of Commerce and Industry (MCCI), a powerful body of businessmen of the country, has suggested that the concession, if at all allowed, should be limited to earnings from legal sources and that investments should be directed to productive sectors only.
By the finance minister's own admission he did not morally support whitening of black money. Why then he veered from the original stand remains a question. He has given his own reasons, but we believe that the budgetary proposal needs to be reviewed and revised on the basis of recommendations pouring in from different think-tanks, expert groups and representative trade and chamber bodies.
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