Finance Minister Pranab Mukherjee on Tuesday exuded confidence that modified tax avoidance agreements with various countries and pacts with tax havens will help in dealing with the menace of black money.
“Income Tax Department is engaged in ways to tackle with black money,” he told reporters on the sidelines of an income tax conference in New Delhi.He said the government was amending Double Taxation Avoidance Agreements (DTAA) by inserting a clause on information regarding banking sector and also entering into tax information exchange agreements (TIEA) with several countries, including tax havens.
“These (DTAA & TIEA) are two important instruments which will help the income tax department tackle black money and black money stashed outside…we will able to impose tax on them,” Mukherjee said.
DTAAs have been amended (clause on banking sector has been inserted) with 40 nations and TIEA has been sealed with tax havens like Isle of Man, Bermuda and Bahamas.
In absence of a clause on banking sector in DTAAs, the contracting countries were not sharing information in this regard.
However, after the G20 Summit in Pittsburgh and subsequent meetings of Finance Ministers of the member countries, all the 20 countries agreed to amend DTAAs.
Mukherjee also said with strengthening of the transfer pricing mechanism, the government has been able to prevent outflow of Rs 33,000 crore.
“We have strengthened our transfer pricing mechanism through which we are preventing the transfers (of fund) through various dubious practices…Rs 33,000 crore have been detected, which otherwise would have gone out of the country,” he said.
Black money has become a big political issue in the country, with the opposition accusing the government of not doing enough to bring back the illegal money stashed abroad.
Baba Ramdev and Black Money
There is no doubt that a billion Indians will support Baba Ramdev in his campaign to bring back black money.
But even if he succeeds, new black money will replace the old black money !
You cannot cure a disease by treating its symptoms.
We must find a way to “ stop “ the generation of black money in the first place.
New finance minister of West Bengal, Dr. Amit Mitra recently confirmed that out of every rupee of revenue, 35 paise goes towards interest payment on state borrowings and 58 paise goes to pay salaries of Govt. staff, leaving a measly 7 paise for development.
So the honest tax-payer is asking :
“ When I pay the government, one rupee by way of tax, I get back only 7 paise worth of infrastructure / housing / education / healthcare etc. Then why pay taxes ? Why not finance these needs directly on my own – bypassing the tax authorities ? “
And this is true of nearly all the states of India.
My suggestion :
If a tax payer invests any amount into Govt approved Special Purpose Vehicles ( SPV ), solely devoted to create infrastructure / housing / education / healthcare etc, let that money be tax-free, with no questions asked as to its source. All the profits / dividends earned by an individual thru such investments must be made 100 % tax-free and forever .
Just imagine what an annual investment of $ 100 billion ( Rs.5 lakh crores ) on activities like these can do to our economy !
Within 5 years, it will pull-up 500 million people above the “ Poverty Line “.
My request to Baba Ramdev :
Please refocus your strategy. We are with you all-the-way.
With regards
hemen parekh
Jobs for All = Peace on Earth