I/III. http://www.asianage.com/columnists/war-black-money-hoax-044
War on black money is a hoax Oct 05, 2015 Paranjoy Guha Thakurta What are the problems with the new Black Money Act and immunity scheme? The bulk of the black money and wealth generated by Indians is not outside the country but well within India... And even the money kept abroad illegally by citizens is unlikely to have remained there for very long. The Narendra Modi government’s new scheme to unearth black money kept by Indians outside the country has yielded just about Rs 4,147 crore from 638 declarations. On average, this figure works out to a relatively small amount of Rs 6 crore per declaration — either about holding assets abroad illegally or earning income outside the country which has not been disclosed. Nearly two-thirds of this money, or Rs 2,488 will come to the exchequer by way of taxes. This measly sum is a clear indication that large holders of black money chose not to comply with the three-month-long immunity scheme that ended on the last day of September. Contrary to expectations, there was no last minute rush to apply for the immunity scheme. The scheme, which received a rather lukewarm response despite a fair amount of publicity that was given to it, came as part of the Undisclosed Foreign Income and Assets (Imposition of Tax) Act that was passed by both Houses of Parliament in May. That the law and the disclosure of income scheme under it would have, at best, a marginal impact on the huge problem of black money in the country was anticipated by the government’s critics. Still, Union finance minister Arun Jaitley sought to downplay the response to the disclosure scheme. He and top officials in his ministry, including economic affairs secretary Shaktikanta Das, held out threats that the tax authorities would now crack down hard on those Indians who have illegally stashed away income and undeclared assets abroad. However, these threats sound like bluff and bluster. To come to the basic question, why was this ineffective law enacted in the first place? In the run-up to the 2014 elections, Narendra Modi and leading politicians from the Bharatiya Janata Party had claimed that if they were elected, they would bring back enough black money to distribute a sum of `15 lakh to each and every poor Indian family. Some of Mr Modi’s supporters, like Baba Ramdev, even claimed that the money would be brought back within 100 days of the new government coming to power. Clearly, these were unrealistic expectations. Having repeatedly asserted that the previous Congress-led government had deliberately not revealed the names of those with foreign bank accounts because it was trying to protect them, the BJP government was now on the backfoot. It had do something to counter its political opponents who were repeatedly carping at the Prime Minister for making tall claims and promises in his election campaign that were not fulfilled. The fact is that no one knew then — or knows now — how much money has been illegally kept outside the country by Indian citizens, although there have been guesstimates galore. On November 2, Mr Modi acknowledged in his Mann Ki Baat radio broadcast that the exact amount of black money stashed abroad by Indians was not really known: “Till date, no one knows, not me, not the government, not you, not the earlier governments, as to how much money is actually stashed. Everyone quotes a different figure in their own ways. However, I do not want to get entangled in the numbers, my commitment is whatever is the amount — two rupees, five rupees, one crore or more — that money which belongs to the poor, should be brought back. And I assure you that there will be no shortcomings in the efforts that I make.” This issue became more controversial when BJP president Amit Shah stated in an interview that what had been said in the run-up to the elections was in the nature of jumla — a quaint word which means an idiomatic statement made with rhetorical flourish or exaggeration. What are the problems with the new Act and immunity scheme? First, the bulk of the black money and wealth generated by Indians (perhaps as much as 90 per cent) is not outside the country but well within India. In other words, the new Act seeks to address only a very small part of the problem of black money. Second, even the money kept abroad illegally by citizens is unlikely to have remained there for very long. The funds would either have been spent or transferred or laundered white by moving the money across various jurisdictions, in particular, tax havens like Mauritius and Singapore — a phenomenon called “round tripping”. That’s not all. The third limitation of the immunity scheme is that it is not applicable to non-resident Indians (NRIs) and persons of Indian origin (PIOs) with money and assets abroad. It is only applicable to Indian residents who are income-tax assessees. According to the Reserve Bank of India’s definition, an NRI cannot spend more than 182 days in India. It is quite simple for holders of undisclosed foreign income and assets to change their residential status in anticipation of the new law. As has been pointed out in the pages of this newspaper by senior advocate and former additional solicitor-general of India Bishwajit Bhattacharyya, the law is “farcical” because even if a person holds an illegal foreign account in contravention of the Foreign Exchange Management Act (FEMA), 1999, the new Act does not apply to him although FEMA has extra-territorial jurisdiction and applies to all branches, offices and agencies outside India, owned or controlled by a resident of the country. Another serious flaw in the Act is that there is no provision to compel the declarant to repatriate funds in foreign currency. He has further pointed out that the date of enforcement of the new law was brought forward by 276 days, from April 1, 2016, to July 1 this year, by an administrative order which sought to supersede an act of Parliament. This, Mr Bhattacharyya feels, was clearly illegal but not challenged. The short point is that the new law is largely irrelevant as far as tackling the huge problem of black money in India is concerned. It has been enacted essentially for political purposes, for the Modi government to claim it is acting against Indians who have illegally taken wealth out of the country and in order to save face for the Prime Minister. Its utility is extremely limited. The writer is an educator and commentator II/III. http://www.asianage.com/columnists/black-money-farce-104 Black-money farce Sep 30, 2015 Bishwajit Bhattacharyya The amateurish manner in which the Black Money Act, 2015, has been handled by the government inspires little confidence. The law is flawed ab initio and is unlikely to succeed. Declare foreign assets by Septemb-er 30, 2015, or perish”, thundered the government on September 21. Government’s press release reads: “persons” holding undisclosed foreign assets after September 30, 2015, would be slapped with higher penalty, forfeiture of assets and prosecution. So, declare forthwith, warned the government; and escape with a lesser damage. Income-tax (I-T) officials will keep your name secret, and will never harass you, assured the finance ministry. Really? But who are these “persons” being targeted? “Residents” under the Income-Tax Act, 1961. You become a resident by staying in India for 182 days. The act envisages several other situations in which residential status is conferred on those who travel in and out of India frequently. The moment you become a non-resident, you are out of the clutches of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Everything else becomes irrelevant. You may hold an illegal foreign account in contravention of Foreign Exchange Management Act, 1999 (Fema), yet you are out of the zone for crucification under the new law. This is curious since Fema has extra-territorial jurisdiction; it applies to all branches, offices and agencies outside India, owned or controlled by a resident of India. When the Black Money Bill, 2015, was introduced in the Lok Sabha on March 20, 2015, it was mentioned in Clause 1 (3) that the law would come into force on April 1, 2016. That was enough of a notice (377 days) to all the residents, holding undisclosed foreign assets, to plan to change his/her residential status. The enacted Black Money Act, 2015, also clearly stipulated that it would come into force on April 1, 2016. This enactment of a farcical law must have been seen through by some within the government, so on July 1, 2015, the government abruptly issued an order clarifying that the law has come into force on July 1, 2015. The enforcement date of the law was preponed by 276 days. This was a glaring illegality. Parliament alone could have altered the date. It is elementary that an administrative order cannot violate or supersede an act of Parliament. So, a farcical law was superseded by an illegality. It’s surprising that none challenged this illegality in a court of law. As the deadline of September 30, 2015 approaches, the government seems desperate to coerce disclosure to garner revenue. Garner revenues it will, but how much and at what cost is the issue. Only those about to be caught are likely to disclose. Not others. This is because Section 5 of the I-T Act already provides that a resident’s global income is taxable and therefore needs to be declared. Failure to disclose can obviously entail penalty and prosecution under the existing I-T Act. The new law barely scales up the penalty, and instils a little more fear. That’s not enough ground to be optimistic about the zooming success of the Black Money Act, 2015. If the existing tax law has not scared one, it is facile to assume that a more stringent version would. Government’s assurance, that information would be kept confidential in terms of Section 138 of the I-T Act and that fears of harassment are unfounded is unlikely to make a difference. A stringent law will only dampen the investment climate. A serious flaw in the Black Money Act, 2015, is that there is no provision to compel the declarant to repatriate funds in foreign exchange. There should have been a requirement that all tax and penalty must be compulsorily remitted to India in convertible foreign exchange through the approved banking channel. In the absence of any such requirement, there would be a propensity to pay tax and penalty only in rupee. This will have a three-fold negative impact: first, payment in rupee would imply that the declarant will have to generate additional rupee, which may well be generation of black money. It is not clear whether the I-T department would question the source of payment of tax and penalty. If it does, another Pandora’s box may be opened. Second, India would be denied the foreign exchange. And third, 40 per cent of the declarant’s black foreign assets would stand legitimised. Can this be the intention of the legislation? It defies logic as to why those residents, who have surreptitiously accessed convertible foreign exchange (forex) abroad, should not be compelled to pay/repatriate forex in India and, instead, continue to retain them abroad! This is absurd. And now, on September 24, the Reserve Bank of India announced that there would be no action on foreign assets declaration under the Fema! It’s a joke to announce this barely six days before the compliance window closes. Besides, can the RBI through rule-making power override a law made by the Parliament? Surely not! What the RBI announced through the press ought to have been a part of the bill introduced in Parliament on March 20, 2015. The amateurish manner in which the Black Money Act, 2015, has been handled by the government inspires little confidence. The law is flawed ab initio and is unlikely to succeed. The new law fails to recognise that today residents can freely hold, own, transfer and invest foreign assets throughout their life if these assets were acquired while one was a non-resident. This is the mandate under Fema, made effective on June 1, 2000. Now, after 15 years, a criminal flavour is being given to a legitimate foreign exchange transaction abroad. Is this not retrospective amendment, Mr Jaitley? *The writer is ex-additional solicitor-general of India and senior advocate, Supreme Court* III. http://indiatoday.intoday.in/story/i-became-a-victim-of-fraud-promoting-narendra-modi-says-ram-jethmalani/1/490089.html I became a victim of fraud promoting Narendra Modi, says Ram Jethmalani The senior Supreme Court lawyer, who was in Patna to lend his support to veterans fighting for OROP, said the BJP did nothing to bring back black money, and had it done so, it would have been able to meet the demands of ex-servicemen. PTI | Patna, October 4, 2015 | Posted by Dianne Nongrum | UPDATED 18:42 IST Under fire from the grand secular alliance for his failure to bring back black money stashed abroad, senior Supreme Court lawyer and Rajya Sabha member Ram Jethmalani on Sunday said he had become a "victim of fraud" by playing into the hands of Narendra Modi and Arun Jaitley. Also Read: Jethmalani roots for BJP's defeat in Bihar Assembly polls "Today I have come here to do 'penance' for what I did by promoting Narendra Modi as the leader of the country (before the Lok Sabha polls). I thought that God has sent him as his 'Aulia' (representative) for India's salvation...How I became the victim of fraud," Jethmalani said in Patna. The veteran lawyer was in Patna to fight for the cause of army personnel's demand for "One Rank One Pension". Also Read: Is the NDA govt's black money scheme a flop show? Jethmalani said both the UPA and Modi-led government at the Centre did nothing to bring black money from foreign tax havens and held both P Chidambaram and Arun Jaitley responsible for the failure to disclose the names of persons holding the black money. "Both P Chidambaram and Arun Jaitley should be first arrested and prosecuted if we really want to bring back black money. Jaitley...took recourse under the garb of Double Avoidance Tax Treaty (DATT)," he alleged. The senior lawyer said German government had the names of 1,400 people who have stashed their money in tax havens abroad and the German government was ready to part with the information with the Indian government free of cost but with a rider that there should be a written request from the government. "I wrote a two-line letter to BJP leaders and none of them signed the letter," he said, adding that as per a BJP task force committee, there are USD 1,500 billion, which is equivalent to Rs 90 lakh crore, are lying in tax havens. Stating that the government has not been able to bring back a single dollar in the country, Jethmalani said had the government been successful in bring black money, it would not have been facing financial problem in acceding to the demands of ex-servicemen on OROP. "Bihar should be the starting point...Defeat them...They have made Ram Jethmalani fool but the people will not be fooled in Bihar," Jethmalani observed. -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send an email to [email protected]. Visit this group at http://groups.google.com/group/greenyouth. 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