Demonetisation carried pain, admits Arun Jaitley

The prime minister’s decision is intended to create a new “normal”. It seeks to change the expenditure pattern of India and Indians. It is obviously disruptive

GN Bureau | January 9, 2017


#Demonetisation   #Black Money   #RBI   #Narendra Modi   #Arun Jaitley  


The implementation of the demonetisation decision carried pain. “It can lead to short term criticism and inconveniences. Drop in economic activity on account of the currency squeeze during the remonetisation period would have a transient impact on the economy,” wrote finance minister Arun Jaitley in a Facebook blog.

“The decision involves high level of secrecy and printing substantial amounts of paper currency, distribution through banks, post offices, banking mitras and ATMs.”

It said that the prime minister’s decision is intended to create a new “normal”. It seeks to change the expenditure pattern of India and Indians. It is obviously disruptive. All reforms are disruptive. They change the retrograde status quo. The demonetisation puts a premium on honesty and penalises dishonest conduct.

Read: Recession is likely: Prof Arun Kumar on demonetisation

The blog “Demonetisation – A look back at the last two months” said that when 86% of a country’s currency constituting 12.2% of its GDP, is squeezed out of the market and sought to be replaced by a new currency, there would obviously be significant consequences of that decision.

He wrote on Sunday that the Narendra Modi government had absolute clarity from day one that it would move against the shadow economy and black money. It’s first decision was to constitute SIT under the directions of the Supreme Court. The Prime Minister had proposed to the G-20 at Brisbane that international cooperation in sharing information with regard to base erosion and profit shifting should be expedited.

The black money law dealing with illegal assets outside India opened a window for disclosure with 60% tax and provides a ten year imprisonment.

The Income Declaration Scheme (IDS) 2016 was highly successful with a 45% tax. The PAN card requirement for cash transaction beyond rupees two lakhs put hurdles on expenditure through black money. The Benami law legislated in 1988 and never implemented. It was amended and has been put into action. The GST, which is scheduled to be implemented this year, will provide for better indirect tax administration and being a more efficient law will check tax evasion. The demonetisation of high denominational currency notes was the big step in the same direction.

Read: Demonetisation will not have a big bang impact: Experts


Jaitley went on to write that in the year 2015-16, 3.7 crore assesses of the total population of over 125 crores, filed income tax returns. Out of these, 99 lakhs declared income below Rs.2.5 lakhs and paid no taxes; 1.95 crores declared income less than Rs.5 lakhs; 52 lakhs declared income between Rs.5 to10 lakhs, and only 24 lakhs declared income above Rs.10 lakhs. No better evidence is required to substantiate that both in the matter of direct and indirect taxes India continues to suffer being a hugely tax non-compliant society.

“Expenditure required for poverty eradication, national security and economic development have to be compromised with on account of tax non-compliances. For seven decades the Indian “normal” has been to undertake transactions partly in cash and partly in cheque. “Pucca” and “Kachha” accounts are a part of the business language. Tax evasion has been considered as neither unethical nor immoral. It was just a way of life. Several governments have allowed this “normal” to continue even though this compromised with larger public interest.”

The finance minister also wrote that the fact that large quantum of high denominational currency has been deposited with the banks does not render this money to be legitimate cash. Black money does not change its colour merely because it is deposited in bank. On the contrary, it loses its anonymity and can now be identified with its owner. The Revenue Department would thus be entitled to tax this money. In any case, the amendment to the Income Tax Act itself provides that the said money, if voluntarily declared or if involuntarily detected, would be liable for differential and high rates of taxation and penalty.


Read the full blog here 


 

Comments

 

Other News

Spotting and nurturing young talent, helping them bloom

Things don’t turn up in this world, as former US president James A. Garfield once said, until someone turns them up. This is all the more so, when one considers the hidden gems that are waiting to be discovered. The world is full of talented young people who need just a nudge to provide that spark th

Khadi sets new record for single-day sale at Delhi shop

On Gandhi Jayanti this year, the Khadi India outlet in Connaught Place in the capital once again set a new record of khadi sales in a single day. In a single day, the Khadi India showroom at Connaught Place marked sale of Rs. 1.34 crore and broke its own previous record of Rs. 1.01 crore se

Mumbai Metro: Delay on Tracks

In Mumbai, the ninth most populous and congested city on the planet, high rentals compel citizens to spend five hours on an average travelling to work every day. Mumbai’s Metro Rail System extending towards Mumbai Metropolitan Region (MMR) will not only provide East-West connectivity

Sustainable tourism is responsible tourism

Tourism is a huge part of global culture nowadays and is also one of the biggest sources of revenue across the world. According to the World Travel and Tourism Council (WTTC), in 2019, the tourism industry contributed $8.9 trillion or 10.3% to the global GDP. The industry witnessed a massive lull in 2020 d

Fernandes: A Life as Legacy

The Life and Times of George Fernandes By Rahul Ramagundam Penguin/New India Foundation, 624 pages, Rs 799 Amer

India set to enter 5G era

After years of intense preparation, India is about to take the next step in information and communication technology. Prime Minister Narendra Modi will launch 5G services in India on October 1 and also inaugurate the 6th Edition of India Mobile Congress 2022 to be held till October 4, at Pragati Maidan, Ne

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter