New Delhi, December 4
The government, by making it mandatory of seven categories of high value transactions to file annual information returns, is seeking to bringing in the tax net a part of a huge black money whose size is believed to be in the range of Rs 10 lakh crore.
The Finance Ministry has said there are no exact estimates of the amount of black money in the country. Delhi-based economic think-tank National Institute of Public Finance and Policy ( NIPFP) had attempted an estimate of the black money in circulation in the country.
As per the NIPFP estimate, which was carried out in 1983-84, the black money in circulation at that point of time could have been in between Rs 31,584 crore and Rs 36,786 crore.
Prof Arun Kumar of Jawaharlal Nehru University (JNU) here, who has done research in the area of black money, has estimated that the size of the black money in the country is presently around 40 per cent of the GDP, which translates into approximately Rs 10 lakh crore. Effectively, the government is missing out on about Rs 4 lakh crore of tax revenue.
This is more than the current fiscal deficit and higher that the expected direct and indirect tax revenues.
The major evasion of taxes is taking place through transactions in cash in various segments such as real estate and other related areas.
Experts are of the opinion that by making it mandatory for seven categories — banks, mutual funds, companies issuing shares as well as debentures, credit card providers, registrars and the RBI — file annual information reports (AIRs), the government is tightening the norms of transactions taking place only through institutions.
The Finance Ministry has notified recently that the registrar and sub-registrar would have to file AIR in case of purchase or sale of any immovable property of Rs 30 lakhs, the notification said. Banks would have to file AIR on deposits in savings account beyond Rs 10 lakh while credit card issuers would have to furnish AIR on all card transactions beyond Rs 2 lakh. The RBI would also be required to file AIR on sale of RBI bonds of Rs 5 lakh and above to any person, it said.
Besides, mutual funds would be required to file AIR if investment being made was Rs 2 lakh or more to acquire units. Companies or institutions issuing bonds or debentures would also be required to file the returns if the investment was to the tune of Rs 5 lakh or more.
Incidentally, Mr Chidambaram in his
earlier stint as Finance Minister during the United Front regime, had come out with the Voluntary Disclosure of Income Scheme (VDIS) which had mopped up about Rs 10,500 crore of revenue from undisclosed sources of income.
The experts here said while VDIS did manage to mobilise substantial revenue for the government, it failed to attack the fundamentals of the black money.
VDIS, an economist said, encouraged more income generation and was an admission that the government was now helpless in taking the black income generators. It had the potential of developing a tendency among honest tax payers to become dishonest.
The experts opined that to tackle the problem, there should be increased emphasis on wealth taxation as wealth could not be hidden and one could not hide property and ostentatious consumption.
Ironically, the wealth tax collection presently is less than what it used to be in 1975 even though during the last 25 years wealth in the country would have grown by a factor of 50 or 100.
