Ever since I started focusing on economic issues, that is some 30 odd years back, black money has been in the news.While I was a student of economics, I was taught that bad money drives good money out of circulation. That is what Gresham law says. That may be true in the case of black money also; it must be driving the good money, the so called white money, out of its relevance. At this rate, this debate: How to tackle the menace of black money will continue in perpetuity in Indian context.
Why it is so? My simple answer is that nobody is interested in curbing the source of this money. Political parties are giving only lip service to this issue. They need money during the election. An unofficial estimate put that black money in India is as big as white money. During the elections, they need it in plenty. Once accepted from a businessman or industrialist or people of that ilk, how can they hunt them out. I am told that in the last Maharahtra assembly elections, candidates who were reasonably sure of winning, were distributing Rs 900 per vote. For a constituency, there will be at least two candidates, who might think that they have a fighting chance. If they distribute Rs 900 each to a voter, each voter will get Rs 1800. it is a windfall and those who want to say no to that windfall are not fit enough to live in the market driven economy.
My limited point is that it leads to fair distribution of income. Rs 1800 will be higher than the subsidy that the government is intending to credit to the accounts of the account holders from the vulnerable sections of the society as subsidy for gas or kerosene. it is enough to buy a bicycle. No politician or rich man will part with that amount when you ask them to do that. Here he or she has a purpose. If that purpose-good or bad-can lighten up the hope of a vast majority of the people, why to stop them. Also, this money can peak with every passing election, as if it were linked up with inflation index. Who knows by the next election comes, this amount also can double and the poor and vulnerable sections can hopefully get a quantum jump of money in return for their valuable votes. Also, it will deplete the stock of black money to that extent. Does the fiance minister listen to it?
Years back, if my memory is right, when Morarji Deasi was the union finance minister, he introduced the concept of expenditure tax and for that he invited an economist named Kaldore to study the Indian taxation system and to devise a system to plug the loopholes. A combination of income and expenditure tax was introduced. Expenditures in hotels and other places were taxed. There was a lobby which worked against it and the expenditure tax was abolished and now we have only Income Tax.
The clamor for abolition of income tax is there already. Dr. Subramania Swamy, who doubles as a politician and economist vehemently campaigns for abolition of Income Tax. Could this be tried in Indian situation? A new system of revenue generation should be evolved. Could we collect a one time tax from people acquiring properties such as luxury villas, land, shopping complexes etc. since the investment is done mostly using the black money. This tax can be collected from both the seller and buyer, with reasonable exceptions for people from the underprivileged classes based on strict scrutiny of their income based on aadhar.
Presently, there is a tendency to stash money in real estate. The efforts of the government to curb benami transactions did not meet with success on account of the hectic lobbying by the vested interests. What is important is to have a political will to curb the balck money and not singing different tunes, while you are in opposition and holding the power to govern. Let us stop this double talk and then we may have a reasonable chance to do away with black money.
