Demonetisation anniversary: Prime Minister Narendra Modi on November 8, 2016 announced that old Rs 500 and Rs 1000 notes would cease to be legal tender money. It was an unprecedented move that took the nation by surprise. Aimed at targeting and eliminating black money from the economy, demonetisation is likely to go down in history as one of the boldest moves by the Narendra Modi government. Even as Opposition and critics question the rationale behind the step, a majority of the 15 analysts and economists polled by Financial Express Online found demonetisation to be a somewhat “effective” step to detect black money.
But, it’s been one year since demonetisation was announced and now experts feel it is time for the government to follow up with stricter measures to attack black money menace. Quick and exemplary penal action is the way ahead, feel experts. For one, many analysts advise a crackdown on benami properties and gold hoardings – the two most popular ways of parking black money. Rupa Nitsure, Chief Economist at L&T Finance Holdings advises “targeted attacks on those who have been showing non agricultural income as agricultural income and avoiding income tax”. “Also, target people who have invested billions of rupees in physical assets like real estate & gold,” she says.
Ranen Banerjee, Partner – Public Finance and Economics at PwC India believes that “effective implementation of legislations like Real Estate Regulatory Authority Act (RERA), digitization of land records, robust tax non-compliance supervision through enhanced data analytics capability,” are the next steps that should be taken in the fight against black money. “Probably as a nation we need to now, try and even bring the agricultural sector into the tax net,” says an economist from the banking sector.
Yet another interesting suggestion that emerges is rewarding honest tax payers. Arihant Capital Markets is of the view that regular tax payers should be given incentives. Concurs, Dhirendra Kumar, CEO of Value Research, “Tackle the tax evaders and the tax guys who are abusing the honest tax payer.” “There has to be a reward based system for the honest tax payer and also effective penal action against the tax guys who misuse the system,” he says. Edelweiss’s Sahil Kapoor calls for simplification of the direct tax code. “That is an ideal and needed step,” he says.
Lowering of tax rates would encourage people, feels Vikas Vasal, National Leader – Tax at Grant Thornton India. “The government should look at reducing tax rates and easing compliances. This will encourage people to comply with the tax laws,” he says. Nikhil Gupta, Chief Economist, Motilal Oswal thinks that the government should make it “mandatory – without any exception – for all companies to file their financial/operational results on quarterly basis”.
Below are some of the other suggestions made by experts to curb generation of black money:
. A genuine cleansing of the political funding mechanisms and most importantly, an overhaul of the first-past-the-post multi-party democratic system that India has.
. Accelerated GST reforms, further but well-paced formalization and digitisation of the economy
. Make all transaction beyond 10,000 through digital mode. Charge extra tax for cash transaction.
. Push for transparency in each and every transaction by bringing digital framework
. Regulatory overhaul to ensure there is a legitimate paper trail to source the money generated and money spent. Stricter vigilance on round-tripping and offshore accounts. Curb black money flow between asset classes. Strengthen GST/Aadhar linkage
. Scrutinising the deposits made after demonetisation and stringent implementation of new laws.