It’s hard to tell whetherwill turn out to be a bold hit or a costly miss, but it appears to many that the government has taken the black money bull by the horns. Announcing the withdrawal of Rs 500 and Rs 1000 notes, Prime Minister listed several steps that his government had taken so far in its war on black money:
Looks impressive, what’s not to like? Just that, once you discount the hype, it’s not very different from what’s been done by past governments, whether the United Progressive Alliance (UPA) or the United Front (UF).
Show me the money
Consider the figure of Rs 1,25,000 crore collected over two-and-a-half years. The government hasn’t provided a break-up, but based on finance ministry replies to parliamentary questions, it includes the following:
Rs 65,250 crore declared under the 2016 Income Disclosure Scheme (of which 45% will flow in as actual taxes)
Rs 21,354 crore of undisclosed income seized from individuals and businesses (under Section 132(4) of the Income Tax Act)
Rs 22,475 of additional income assessed from taxpayers by surveys (carried out under Section 133A of the Income Tax Act)
Rs 8,186 crore of undisclosed income held by Indians in accounts with HSBC Geneva, revealed by the French government in 2011
Around Rs 5,000 crore of offshore holdings by Indians that an International Consortium of Investigative Journalists investigation exposed in April 2013
All of which adds up to Rs 1,22,265 crore – close enough to our headline figure. But how remarkable is this effort?
The income disclosure scheme is a one-off (more about that later), but what about thebrought into the open via searches, seizures and surveys? The chart below shows the record in previous years (source here):
interesting. Using the same definitions used by the Modi government, it turns out that the quantum of black money exposed in the last two years of the UPA was more than Rs 1,30,800 crore. That’s right – the UPA tracked down more black money than the Modi government did and in a shorter time frame.
As always, there are caveats. Not all the money assessed under Section 133A should be strictly considered “black”; some of it consisted of income that taxpayers felt was not taxable for whatever reason, but the authorities disagreed. Still, if the Modi government wants to count all those funds under its “black money” haul, it cannot deny the UPA credit for a bigger haul.
Bring back the money
That’s fine, you might say, but hasn’t the Modi government adopted a much more comprehensive approach to black money than the scam-tainted UPA? It’s passed bills to bring back black money, succeeded with its income disclosure scheme and, as Modi himself stated, reached agreements with many foreign countries to provide tax information.