A Gordian Knot ?

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Is black money issue a Gordian Knot that cannot be unraveled  ?

One gets that feeling while observing the NDA governments attempts, viz:

>   Setting up of SIT

>   Signing bi-lateral treaties with foreign countries for exchange of info on bank

accounts held by Indian citizens in these countries

>   90 day window for declaring assets held illegally in foreign banks

>   Proposal to grant minor tax-concessions if payments for petrol / diesel etc is

made using credit cards

>   Legislating that sundry kinds of payments are to be made thru banking system

>   Introduction of Gold Bonds

>   Introduction of stringent laws for punishing tax-evaders with jail terms, etc

Could not UPA government have done all of these in the past 15 years ?

And , if they could , why did they not ?

I could think of only 2 reasons , viz :

>   Either UPA government did not think that any of such measures could solve the

black money problem , which is in the nature of a Gordian Knot

OR ,

>   UPA did not want to solve this problem  !

After one year of NDA rule , people are asking :

”  Why is this government , which has within one year , launched some epoch-making economic and governance reforms , continuing to tinker with the black money issue ?

Why is it focusing on unearthing black money stashed away in foreign banks, which constitute no more than 5 % of the black money hiding within the country ?

Why is all the emphasis on ” past ” black money declaration rather than on prevention of ” future ” black money generation – which goes on unabated  ?  ”

I sincerely believe that NDA wants to put a permanent stop to black money generation

But , it just cannot think ” Out-of-the-box ” as Alexander the Great did when he simply cut the Gordian Knot with his sword rather than try to untie it  !

It is still not late for NDA to do the following :

>  In the first instance , instead of increasing the personal Income Tax rates with

each higher slab , reduce these ( eg : 10 % > 9% > 8% > 7% ….. )

>  If this ” Inverse Taxation Regime ” makes people want to declare more and

more income , in order to get into higher tax slab , then next consider total

abolition of Personal Income Tax !

In a nutshell :

>   Take away incentive to hide income

>   Motivate people to declare ALL income

>   Celebrate Wealth Creation

>   With no Personal Income Tax to be paid , everyone will insist on making /

receiving all payments officially thru banking channels

>   Do not tax people at the point of income generation ( Source )

>   Tax them at the point of income expenditure ( Destination ) eg: GST

>   Boost national ” Savings Rate ” to 40 % ( never a Greek Tragedy ? )

>   Enable savings to flow into Infrastructure Bonds ( Railway / Ports / Airports /

Smart Cities / Highways / River Linking / Solar Power etc ) , rather than into

non-productive assets

This is NDA’s ” Moment of Opportunity ” – an opportunity to re-write history !

There is no surer / simpler / faster way to bring India’s 400 million poor people

out of abysmal poverty .

hemen  parekh

05 July , 2015



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