Dr. Anil Lamba
The first question, of course, is: Will India be able to bring back the money lying in banks located in tax havens overseas. Assuming it does, the next question is, what form will it take? Will the money be confiscated or will the persons whose money it is be made to account for it and the applicable taxes, with penalties, recovered?
The latter appears to be more likely. In any case, whenever black money is brought back into circulation, the nation stands to gain. Black money is a scourge that, like cancer, spreads and eats into the vitals of a nation’s economy.
Let us juxtapose a tax planner with a tax evader. The intention of both is to either reduce or eliminate the tax liability. As a result of the actions of both, the nation loses tax revenue. Nevertheless, the tax-planner is considered to be an honest citizen while the tax-evader a crook. Why?
To understand this, consider the income-tax collection process. When one person earns income, he pays income-tax on it. What does he do with the money? Maybe he spends this money on purchasing some clothes for himself. It now becomes the income of the garments’ trader, who must pay income tax. When the garments’ trader spends and purchases a pair of shoes, it becomes the income of the shoe seller who again must pay tax. Each time money merely changes hands it becomes somebody’s income and the governments gets a share of it. Somebody has estimated that out of every rupee printed / minted by the government, more than 97 paise, the government gets back by way of income tax alone.
When the tax planner saves tax (by using the investment opportunities prescribed by the government), the exchequer, no doubt, loses revenue, but the tax planner continues to spend. So the chain remains intact and others who receive the money thereafter can pay taxes.
However, when the tax evader saves tax (by concealing the income), the government loses revenue, which in my opinion is a relatively minor loss, since this revenue was lost even due to the acts of the tax planner. But this minor crime automatically leads to a bigger crime. And the bigger crime is: The tax evader does not spend (for fear of being caught). And he breaks the chain. He now not only deprives the nation of tax which could have been collected from him, but also the tax that countless others after him would have paid.
But when black money gets reconverted into white (whether as a result of an amnesty scheme or a voluntary disclosure scheme of the government or by bringing the money stashed abroad back into the country), the nation benefits due to the tax that will be collected on the income generated by this amount in perpetuity.