Grappling with the menace of black money
Black money has ceased to be an emotive issue. The latest report of Indian funds in Swiss banks growing to a 14-year high did not evoke the kind of anger such news used to at the time of the India against Corruption movement. Perhaps people have realised the futility of knee-jerk policymaking such as demonetisation or retrospective taxation against the menace of black money.
Black money, especially that which is stashed abroad, is like a ghost. Its existence spooks everyone even if they are not sure about the shape and form. All governments in the past and present seem to have shadow-boxed with this ghost without much success. To tackle the problem, governments have, at times, come up with policies that have done more harm to the economy than detected black money. Unfortunately, the issue of black money—money on which no tax has been paid to the government—is more serious than just pilfering of public funds. And at times it is not even illegal. Large corporates or their promoters may not be paying tax on certain profits or earnings through perfectly legal routes created over the years by governments across the globe, India included.
People do take undue advantage of exemptions and relaxations in tax laws meant to promote investment, setting up of businesses, etc. A large chunk of the black money could, therefore, be more unethical than illegal, unless of course the money earned is through ill-gotten means like drug dealing and smuggling.
After the financial crisis of 2007–08, globally there have been concerted efforts to put a leash on the practice of shifting profits to tax havens or low-tax regimes.
Countries under the aegis of OECD and G20 have been mobilising support to have a minimum corporate tax globally, tax digital companies that are jurisdiction-agnostic, and also a multilateral agreement for seamless exchange of information. Identifying and curbing the generation of black money is easier said than done, and it needs smarter, not emotional, policymaking.