BackSqueeze on black money
It is safe to say India has got its act on curbing black money in reverse gear
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It is safe to say India has got its act on curbing black money in reverse gear. In most western economies, the problem hardly exists: the tough financial reporting standards in place for banks and individuals ensure harsh laws to check illicit flows are rarely used.
India has some tough laws, including the ones passed recently, but illicit financial flows out of the country are rampant. As India creates databases that link tax records, Aadhaar numbers and bank transactions, the space for generating illicit funds—basically money that’s not in the tax net—will narrow.
On Monday, finance minister Arun Jaitley urged tax officers to squeeze the parallel economy gently. Perhaps he is concerned about the negative labelling such action may provoke. He should not worry on that count. There is a world of difference between levying extortionate tax demands on big companies and legitimately demanding taxes due to the government.
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