Black Money - Income Tax weapon of Search & Seizure becoming STINGLESS!

The hot topic of the day is Black Money Stashed Abroad. The question is what is Black Money. In simlle words, it means unaccounted wealth acquired, cheating the governments of their taxes. Since the Black money content cannot find a place in a legal system, those generating Black money often stash it at off-shore locations. There are many ways to acquire Black Money. The oft used method is by profit shifting through multi layering of entities with non-transparent ownership. This having acquired enormous proportions, the Governments across the globe find themselves starved of their spending needs in the economic slowdown scenario.
In an effort to address this, the Organization for Economic Cooperation and Development (OECD) got together to work towards the automatic information exchange protocol. Sharing of information effectively under the protocol will enable establishing audit trails and thereby detect the points of tax evasion.
Apart from this, the U.S.Government had passed the Foreign Account Tax Compliance Act (FATCA) - the new anti-tax evasion law - according to which the countries which fail to sign FATCA by December 31, 2014 will be subject to regressive 30% withholding tax in respect of payouts by US financial entities.
However, the Indian Government was forced to hand over information about foreign account holders at the instance of the Honourable Supreme Court of India last week . Though submitted in a sealed cover it has raised concerns as to the confidentiality clause in Double Taxation Avoidance Agreements ( D T A As ) entered into with various countries. The Swiss were prompt to raise a point with Government of India because such information can only be revealed if it leads to prosecution. The Indian Government , had not only to skip signing the OECD protocol on 29th October 2014, but cannot proceed in the direction of signing the FATCA also.Thus, signing of bilateral and multilateral agreements may be ruled out unless the Supreme Court at the next hearing of the case on December 3rd gives its nod over the confidentiality clause.
At this point of time, the following issues arise for consideration and possible quick action:
a) Do we really have manpower to detect the origination of the black money;
b) Do our legal system and democratic values allow for transformation of black money into white
c) Would we be able to remain compliant of the confidentiality clause of the DTAAs’.
d) How long it may take to bring the black-money to be taxed.
Viewed in the context of the above situation and while India is struggling to get at-least information from tax heavens about its residents, having stashed black money abroad. While as many as 50 countries including Switzerland, Kaman Islands, Luxembourg, Mauritius, etc., have agreed to provide the information, the position as it


stands today is that it has not seen the day light. Therefore, getting the information
about the black-money holders and ultimately taxing it, seems to be an arduously
long drawn if not next to impossible. The desire to bring back the black money into the main stream may remain as day-dream and the dramatic stage of delusion at which the matter stands today is that "bringing BLACK MONEY stashed abroad is POSSIBLE...., NOT POSSIBLE.......AND STILL POSSIBLE......", to mean , with passage of decades, to say that it is “'next to impossible"
What we need is to get the black money stashed abroad for the benefit of common man. This is the demand of the day. To fulfill it, there appears to be only one way out, which is to formulate a scheme in the form of "Amnesty" fixing a structured rate of say, 50 per cent of the quantum of black money involved. This scheme should be made operative for a reasonable period within which people can come clean .Better to have “A bird in the hand is worth two in the bush” and thereby saving lot of costs and also enable us to sign OECD/ other protocols. Shall we say "A STITCH IN TIME, SAVES NINE'.

Venkata Ramana nageswara dutt 06/11/2014