Whenever in doubt set up a committee. That has been a standard operating procedure for the Union government. Just last week it informed the Supreme Court that it had constituted a 10-member “specialized” committee to monitor investigation and take steps to bring back black money kept abroad in banks.
It should take a leaf out of Britain’s book on the subject. It has been in talks with Switzerland since last October to levy a one-off tax on money stashed by Britons in secret Swiss banks. It also plans to introduce a withholding tax on new deposits. While the deal is yet to be signed by the two countries, it represents a significant attempt to curb such practices. The withholding tax, 50% by one report, would apply to income from accounts in Swiss banks and would be close to the highest levels of income tax payable there.
If this sees daylight, it would be in stark contrast to the weak-kneed efforts in India where under similar schemes a maximum of 30% tax has been levied to turn illegal wealth into “white” money. One could say that such a scheme is “fair” as 30% is the highest tax bracket on income tax in India. The magnitude of the problem in India, however, requires a far more severe level of tax—if it is to have a deterrent effect. Global Financial Integrity—a non-profit organization—estimated that from 2002 to 2006, India lost $16 billion per year in illicit financial flows (IFFs), a sum that this country can scarce afford. The scale of IFFs from 1948-2008 defies imagination.
Yet, India is yet to even take baby steps in curbing such flows. One painfully obvious reason is the ability of individuals who indulge in such illegalities to game the system. It may sound cynical but forming “specialized” committees to “monitor” the problem comes pretty close to manipulating the system. In fact, can the Union government give any reason why it has not speeded negotiations with foreign countries to bring back such money?
The dynamics are quite clear. The government pretends to do something once in a while when either the courts force its hand or when opposition parties raise the political temperature, again mostly for opportunistic reasons.
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