The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Abhishek Barui, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur
The release of Panama Papers a few days ago brings to light the seriousness of the issue of black money stashed in overseas tax havens. The problem is not only limited to India but is spread across continents.
The Panama Papers reveals multiple secretive offshore companies and throw light on how these can be used to facilitate bribes, arms deals, tax evasions, financial fraud and trafficking. In the Indian context, specifically, this raises several issues surrounding violation of exchange control norms and tax evasion, particularly in the light of the recently enacted Black Money law.
The Black Money Law enacted in 2015 provided a framework for taxing and punishing those with undisclosed money stashed abroad. The Act also provided for a limited period compliance opportunity enabling a one-time declaration to be made in respect of assets overseas. The compliance scheme, though, only attracted a measly Rs 4,164 crore of black money declared by 644 persons, which led to a tax collection of Rs 2,428 crore.
Prior to 2004, Indians faced numerous difficulties sending money abroad add to it the high tax rate in the country, gave rise to the trend of Indian nationals holding money abroad. But the remittance limit of $250000 a year under the Liberalised Remittance Scheme framed by the Reserve Bank of India and significantly moderated tax rates makes the offshore accounts held by these rich and famous personalities quite purposeless.
This recent episode is expected to get a lot of attention from various factions of the media, but the real question is will it give an impetus to the government’s efforts against black money or this time the episode will be forgotten and the country will move on.