New Delhi: Finance minister Arun Jaitley said on Saturday that a host of reforms rolled out in the recent past is raising India’s economy and polity to a new level of transparency, making illicit wealth generation tougher, tax base broader and political funding more open.
Speaking at the India economic conclave here, Jaitley said that demonetisation of high value currency notes in November last year and the roll out of goods and service Tax (GST) from July are bringing more people and businesses into the tax net, while the new bankruptcy code is changing the credit culture of corporate borrowers.
Demonetisation and GST are also leading to greater tax compliance and digitization of the economy and signs of expansion in direct and indirect tax base are already visible, said the minister.
“Large tax non-compliance used to be a norm. Use of shell companies had become a common practice," the minister said, adding that tax avoidance and round tripping of proceeds of corruption ought to stop in the country.
Round tripping is the practice of sending abroad tax evaded gains and income and bringing it back to India after laundering it, in the guise of foreign direct investment abusing India’s tax treaties. Subhash Chandra Garg, secretary in the department of economic affairs, who was present on the occasion, said that the demonetisation drive succeeded enormously in unearthing the dormant cash in system and gave a fillip to the digital economy.
The minister said that the insolvency code will radically change the way business is done. Companies cannot work on the principle that bank loans need not be repaid, he said. The NDA government on 5 May amended the Banking Regulation Act, 1949, through an ordinance to give more powers to the Reserve Bank of India to deal with non-performing assets.
A few lenders, including State Bank of India (SBI), Standard Chartered Bank and Corporation Bank, have since approached the National Company Law Tribunal, initiating bankruptcy proceedings against some large defaulters.
Jaitley said that for 70 years, the country’s democracy had been funded by invisible money and that the Election Commission of India failed to check it. The minister said that the electoral bonds provision introduced in the union budget 2017-18 was an effort to correct this scenario. Electoral bonds allow a person wishing to donate to a political party to purchase these bonds from an authorized bank using cheques or digital payment methods. These bonds are redeemable only in the designated account of a registered political party.