Tighter controls proposed in black money paper

Finance minister Pranab Mukherjee today tabled the government's white paper in the Lok Sabha on illicit or 'black' money, as promised by Mukherjee on 8 May during the debate on the finance bill.
 
The white paper was largely on the lines reported earlier today (See: Pranab to table white paper on black money today). There was no indication of the amount of black money stashed abroad or floating around in India's 'parallel economy', as the matter is still under study by as many as three government institutes. The focus was on the bullion, gold-based jewellery, real estate, and corporate sectors. 
 
Other areas vulnerable to under-the-table dealing are the financial markets, public procurement agencies, non-profit organisations or NGOs, importers and exporters, and the informal service sector, according to the white paper.

''This covers more or less the entire Indian economy,'' commented an economics expert, tongue firmly in cheek. He also found it amusing that the defence sector, well known by now to be perhaps the biggest generator of black money, had not been mentioned at all.

The white paper proposes to come down hard on these sectors, suggesting that all property purchases must have prior clearance from the income tax department; and that PAN (personal account number) details must be provided for all purchases of gold or jewellery worth more than Rs5 lakh.
 
According to figures from the Central Board for Direct Taxes (CBDT), in 2009-10, the real estate, gold jewellery and bullion sectors, along with the manufacturing sector, the largest chunk of unaccounted money flows.
 
On the corporate front, it blames 'participatory note' investments for much of the money-laundering by Indians, who reroute their ill-gotten money through tax havens like the Cayman Islands or Luxembourg.
 
Global Depository Receipts issued by some Indian companies could also be another possible route for re investment of black money, it adds.
 
The paper suggests the creation of a database of overseas transfers of funds by corporate houses from India to check their nature and legitimacy. ''The FIU-IND (Financial Intelligence Unit - India) may be empowered by law to receive reports on all international fund transfers through the Indian financial system, on the lines of the FIUs of Australia and Canada,'' it says.

The paper also suggests providing tax incentives on the use of debit or credit cards for transactions as 'plastic' leaves a clear footprint.

The white paper has ruled out another amnesty scheme for tax offenders, as has been done in the past to bring more money into the government's coffers at the expense of natural justice.

(Also see: Black money: white paper - May 2012)