Tuesday, May 22, 2012

White Paper on Black Money in India - Highlights

The long-awaited White Paper on black money, which got tabled in Parliament on Monday, prescribed moderate tax rates and measures to rein in the parallel economy in real estate, the financial sector and stock markets. The paper neither gave any estimate of unaccounted money nor revealed any names that could be held responsible for its accumulation.

Citing the examples of the US, UK, France and Germany, the paper said, "In the past, India has also opted for voluntary disclosure schemes. A similar scheme, targeted at black money stashed abroad, can be a one-time option in view of the increasing capacity of tax administration to access information from foreign jurisdiction."  

The paper said reform of the financial and real estate sectors would help reduce the generation of black money in the long term the way the freeing of gold imports had helped check smuggling. The realty sector, which constitutes 11 per cent of GDP, was a common means of parking unaccounted money and a large number of transactions were not reported or under-reported, it said.

Highlights of the Suggestions in the paper:  
  • Rationalise tax rates, cut transaction costs for compliance and administration
  • Pursue further economic liberalisation
  • Ensure financial sector reports all global transactions above a threshold
  • Make electronic payment and reporting pre-conditions for registering property
  • Promote credit and debit cards, as they leave adequate audit trails
  • Reform natural resource sectors in coordination with states
Calling for moderate tax rates, the paper said, "In the past two decades, India has followed the approach of gradually bringing down rates of all major taxes imposed by the central government. The rising tax revenues as a result of this approach reflect greater voluntary compliance and apparent success of the policy measures."

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