Black Money- Government powers are limited

A lot of discussions,meetings, agitations etc are taking place in India asking the Government to bring back the black money of Indians to India. In this connections,there appear to be the following constraints

1. the money belongs to individuals In he normal course, only the owners can take the money from the banks, though the government can explore possibilities of freezing the accounts etc but then the government should have details. individual depositors or foreign banks will not disclose the details.

2. The money is not with the foreign governments It is with the banks in foreign countries. Government of India can only negotiate with the foreign governments and not with the foreign banks as the banks would not negotiate with any one except the depositors Foreign governments may not be able to interfere with the banks without enacting new laws.

3 even if foreign governments enact laws to empower themselves to ask their banks to transfer the money to any bank in India, the foreign banks may not agree. the banks may go to the courts. courts will take into account the laws in existence at the time of deposit of the money.

From the above, it appears that it may not be easy for the government to bring the black money to India. But the government can certainly encourage those who have black money abroad to bring the same to India, by waiving punishment, penalty and also offering lower rates of tax. For example government can announce that the black money can be transferred to India and that those who transfer would need to pay tax of only 20% or 25% and that no questions would be asked. Since the deposits in foreign banks carry no or very low interest, most of the depositors would be willing park their money in Indian banks which pay nearly 10% interest.Unlike in the past,foreign exchange is easily avialable for all legitimate purposes. And also as the Indian Rupee is fairly stable, there is no particular advantage for majority of the people to keep their money abroad. Considering all these,some depositors may not mind paying a penalty/higher tax of 35% or 40% or even more)

Advertisements

One Response to Black Money- Government powers are limited

  1. Argus says:

    If the ‘black money’ is truly illegal and if the laws were genuinely moral/ethical, that is one thing.

    If the money is ‘black’ because people are simply trying to reap the fruits of their own labours rather than have their government steal it — that’s entirely another. No?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: