Chidambaram continues to attack demonetisation; calls it ‘cost-free’ conversion of black money

By: | Published: August 31, 2017 2:39 PM

Continuing the attacks demonetisation, former Finance Minister P Chidambaram said the controversial move in fact gave an opportunity to the black money hoarders to convert it to white money.

Demonetisation provided the black money hoarders a very convenient mechanism to convert their black money into white, P Chidambaram said. (Image: Reuters)

Continuing with the attacks on the Narendra Modi-government over the purported failure of demonetisation, former Finance Minister and a Congress leader P Chidambaram said the controversial move in fact gave an opportunity to the black money hoarders to convert it to white money. “This was a cost-free conversion of black money into white money,” Chidambaram said in an interview with ET Now.

Earlier yesterday, the Reserve Bank of India’s annual report revealed that 99% of the banned currency notes returned to the central bank, giving arsenal to the demonetisation naysayers that the unprecedented exercise was rendered useless by failing to catch black money, since all of it was legitimised by bringing it into the banking system.

Demonetisation provided the black money hoarders a very convenient mechanism to make their black money white, Chidambaram said to ET Now, adding that anyone who had a good story prepared by their chartered accountant or lawyer went into the bank and converted the money conveniently.

However, Finance Minister Arun Jaitley sought to allay the anguish yesterday, maintaining the government stand that the fallout of demonetisation was on predicted lines and the economy will benefit in medium and long term. Arun Jaitley said the fact that money got deposited in banks does not mean that all of it is legitimate money.

“It’s nobody’s case that black money has been completely eliminated after demonetisation,” Arun Jaitley said, adding that demonetisation, coupled with GST, will give a “significant boost” to direct tax revenues as many people have come under the tax net. The government has maintained that although an overwhelming amount of money was deposited in banks, it is not a concern for the government as it is good for the economy that more money has come into the formal system.

Pointing out to further failures of demonetisation, Chidambaram also said that the discovery of Rs 17,526 crore in undisclosed income is a pittance, when seen in the context of the overall direct tax collections. “I wouldn’t be surprised if they (the government) end up collecting only Rs 1,000 crore out of the Rs 5,100 crore” estimated tax liability on this undisclosed income, Chidambaram said, pointing out to the legal hurdles the government is likely to face while going after collecting the tax on the undisclosed income discovered.

The government said yesterday that with over Rs 15 lakh crore of junked currency coming back into the banking system post demonetisation, a “significant portion” of it could be black money, as the the tax authorities have found undisclosed income of Rs 17,526 crore and Rs 1,003 crore has been seized so far.

Some are seeing benefits in terms of expansion of the tax base and additional tax collections, both in the direct taxes and the indirect taxes. The income tax department and other investigative agencies are in the process of scanning and taking action on the basis of information coming from the data on Rs 500 and Rs 1,000 deposited during demonetisation.

Yesterday, at least two eminent bankers pointed out to the gains that might accrue from the information made available after demonetisation. Kotak Mahindra Bank CEO Uday Kotak said it has given a much cleaner economy and has left money trails. His views found favour with JP Morgan India CEO Kalpana Morparia, who also said demonetisation has given a lot of data to the government to work on, adding that the rapidity of digitisation would not have happened without demonetisation.

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