Introduction
What
did Prime Minister Modi let loose ?Angels or demons - in the form of
demonetisation? The debate is going still strong, refusing to leave the
hot-seat, after his path- breaking announcement, throwing India into a
state of collective panic and utter confusion.
Though the Government had repeatedly consoled the people that the bold
step would bring a tremendous boost to growth and economic development,
many economists and critics, including the opposition leaders, are
skeptical about the outcome. Though we have been hearing the debate
almost daily through all multimedia sources throughout November month,
certain serious questions remain to be answered.
Most important question being - Will this step really flush-out black and bribe money from our society?
If not, what all steps are further required to be adopted by the
government to uproot corruption and black money once for all, from the
nation?
Listening to various globally eminent economists, I have come to realise
that few iconic reforms, if taken by Modi government, can break the
back-bone of illicit and illegitimate money generation in the country
for ever.
Proposed Reforms
Proposed Reforms
Eight key steps that may cause short-term pain, but result in long-term dividends, are recommended.
1.
Mandatory digitisation of all land and property records, linked to
PAN/Aadhaar numbers. All citizens may be given six months time to
declare all the properties/ assets and pay wealth tax. Introduction of
'Binami Act' in which all unexplainable, undeclared and disproportionate
properties, will be confiscated by the government, since a huge chunk
of ill-gotten wealth is hoarded in properties. Similarly Gold held by
people will also be liable to be declared. There after every gold
purchase will be closely monitored, allowed only through bank
transactions.
2.
Tax will be introduced on agricultural income, based on the size of
farm holding, leaving small and marginal farmers untouched and
unaffected. Most of the politicians and business men have vast
agricultural lands and they take tax concessions showing their ill
gotten money, as revenue generated from agriculture. This loophole needs
to be plugged.
3.
Small and marginal farmers be provided one-time state assistance to rid
their personal debts taken from local money lenders at exorbitant
rates. The money so given as assistance, must be recorded as
interest-free loan from state, payable only in case the land is sold by
these farmers. This reform will ensure that while the economic status of
farmers improve, the money will not be misused. The land shall not be
allowed to be mortgaged to anyone except banks for crop loan only. This
step will drastically curb the rampant suicides of poor farmers and put
an end to the exploitation met to them by unscrupulous money lenders.
4.
Plastic money should be encouraged by a series of reforms.A charge may
be introduced for cash withdrawal beyond a limit. For example, any cash
withdrawal beyond a prescribed limit per month for an individual or
business entities according to the class of entity will invite a fee, a
certain percentage of the turnover may be allowed to be withdrawn free
of cost, and thereafter rates should be increased in steps. Special
Provisions may be made for small businesses and in their case, the
charge levied may be based on net withdrawal. The aim is to reduce the
cash economy and promote cash-less economy.
5.
When the country reaches a stage of 60% cash- less monetary
transactions,(it could take up to next 5 years) all higher denominations
of currency above Rs 100/- can be demonetised, paving way for an almost
complete cash- less economy like Sweden. To encourage credit/debit card
payments, the settlement cycle must be reduced from monthly to
fortnightly on a mandatory basis, otherwise it will give rise to
unhealthy competition.
6.
Capital Gains Tax on traded security should be calculated by the tax
department by linking PAN and Demat accounts. The assessee should be
required to only file for exemption, if any, from the tax assessed.
7. The funding to political parties should come under the purview of RTI and Income-Tax authorities. The entire donations shall be done through the banks and cash donations will be banned. The political party funding needs to be disclosed to the IT department and matched with the spending in various election campaigns. The ruling party, as well as the Opposition parties should ensure that nobody, including them, is excluded, to be put under the scanner. And, eventually the country should move towards state funding of elections.
8
. The ultimate economic reform which will revolutionise the Indian
economy will be the abolishment of the prevailing 57 types of taxes.
Business men are today unhappy to shell out 30% of their hard earned
money as Income Tax encouraging the generation of black money. If the
prevailing tax regime continues, soon fresh black money will be
generated and new ways and means to siphon money to safe heavens will be
invented by our enterprising business class. Hence it is prudent to
abolish all kinds of taxes and levy a 'Bank Transaction Tax'(BTT) of a
maximum rate of 2%.Since the complete money generated in our nation will
find its way to the banking system, the tax generation of the
government would be colossal, thus wiping out black money completely.
However this can be possible only, when the economy is ripe enough to
sustain such a radical reform.
Conclusion
It is a Herculean task to enforce economic discipline in a highly corrupt and unscrupulous nation who are habitual of circumventing rules and bribing for the easy way-out, of all situations in life. However with the correct and progressive reforms, the system can be revamped. When the corrupt officials find that it's impossible to hide cash or assets without declaring it, they don't have any other option but to forgo it. Huge money hoarded in Swiss banks by big sharks will also be a major concern of government. I earnestly hope that PM will go after these bigwigs, fulfilling his election promises made to the Indian voters.
It is a Herculean task to enforce economic discipline in a highly corrupt and unscrupulous nation who are habitual of circumventing rules and bribing for the easy way-out, of all situations in life. However with the correct and progressive reforms, the system can be revamped. When the corrupt officials find that it's impossible to hide cash or assets without declaring it, they don't have any other option but to forgo it. Huge money hoarded in Swiss banks by big sharks will also be a major concern of government. I earnestly hope that PM will go after these bigwigs, fulfilling his election promises made to the Indian voters.
Jai Hind.
Source:Olive! Green
Source:Olive! Green
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