Painting it all black: Or, attempting whitewash?
Painting it all black
The Finance Minister pointed to the narrow direct tax base by saying that the number of people declaring income of above ₹50 lakh is only 1.72 lakh. He contrasted this with the 1.25 crore cars bought in the last five years. He said, “The predominance of cash in the economy makes it possible for the people to evade their taxes.”
Again, black has been equated with cash. The lacuna is that the above tax data do not give the actual income but the income declared for tax purposes. Given the large number of concessions and deductions available, actual incomes are much greater than the taxable income. So, many more can legitimately afford to buy cars. Further, clarity is needed as to how many cars bought were commercial or by the wealthy. More importantly, if the department could not catch them during normal times then in these days of heavy pressure of work, is it possible? The Income Tax Department is barely able to audit 1% of those in the tax net.
The money deposited in the banks cannot be assumed to be black — the Income Tax Department has to prove that. The explanation given by the suspects would have to be scrutinised. Most of those who deposited more than ₹2.5 lakh would have known that they could be asked questions since the government had already announced that. So, care would have been exercised in depositing the sums, such as showing it on the books as cash in hand and working capital or using shell companies.
In brief, the data given by the Finance Minister in the Budget speech does not imply that demonetisation will help unearth substantial black incomes, because cash deposited does not automatically make it black and black cash is a tiny part of the black economy.
Apropos Professor Arun Kumar’s piece “Painting it all black” (The Hindu, April 6), one feels the comfort of The Hindu allowing different perceptions about Demonetization as one of the ‘tools’ to bring black money into the mainstream economy. Yhis is a well researched article, with xcellent arguments based on good arithmetic. But the efforts to dissuade further probes to unearth black money, coming from a professor, seems unjustified, as anything good or bad has to begin somewhere and initial set backs are part of the game in pursuits like this (crusade against black money) where monstrous vested interests guard the forts and infiltrate cantonments.
All have forgotten the observations made by Prime Minister Narendra Modi on November 8, 2016 while announcing withdrawal of the legal tender character of Rs1000 and Rs500 currency notes. PM had given a recap of efforts initiated to handle black money, terrorism and fake currency. GOI and RBI have taken follow up measures and initiated further steps to arrest growth of illicit money and discourage tax evasion. Media Houses, analysts and other vested interests are blacking out the good work being done by GOI and RBI and magnifying slips and falls out of proportion.
M G Warrier, Mumbai