With the disclosure scheme under the new Black Money Act coming to a close on 30 September 2015, Dipak Mondal of Business Today spoke to Manish Tewari, a minister in the previous UPA government and a corporate lawyer, asking him if the scheme would be able to achieve the desired results.
Q. What are your views on the Black Money Act and the one-time disclosure scheme?
A. The challenge really for the policy makers is how to channelise the non-formal economy into the formal economy. While the government may offer amnesty and one-time opportunity, the truth is that nobody has confidence in what the government says or does (irrespective of which party is in the government) primarily because if you look at the coal allocation case, the supreme court for reasons justified or otherwise decided to cancel all the allocations from 1992 to 2015.
So, any amnesty scheme offered by the government is open to challenge and if at any point of time it is struck down by the court, where does it leave the people who have availed of the scheme? One, it would result in disclosures of names and two, punitive taxation. Today, unfortunately government (when I talk about government I do not only mean BJP government, I talk of government per se) policy announcements are not worth the paper they are written on.
And that's why you see 80,000 people in the past six months becoming NRIs. This tells its own story about the failure of this entire amnesty scheme. The real difficulty is people just don't have confidence in what government says. The government may have the best of intentions, it may want to give people a chance, but what about the big brother--judiciary--which keeps looking over their shoulder.
Q. Why do you think are the reasons for the surge in number of people becoming NRIs in the past six months?
A. Most of them obviously think that they have assets that are better protected with their NRI status than their resident status.
Q. How do you think the efforts of the present government (to bring back black money stashed overseas) are different from what the UPA did?
A. The only way to bring back black money is to get the information and then see if the information can be leveraged in order to either prosecute or take punitive action against the offenders. Between 2009 and 2014, the entire infrastructure of that co-operation was led by UPA. Whether it is the tax information exchange information agreement (TIEAs), the double taxation avoidance agreement, etc all started during UPA's time.
Their (this government's) difficult is that they have not been able to leverage that process at all. And whatever little information they had received, (because they were caught up in their own rhetoric) they divulged it prematurely. This has stopped the flow of information. This is what we kept telling them in the last five years that look these are international protocols and they need to be respected.
Leaving the policies aside, the real difficulty is that today no policy of the government inspires any confidence among investors, and the reason for it is that there is a very curious kind of situation that has arrived. Well, in a democracy every policy of the government comes in for judicial review, but unfortunately the way that judicial review has worked in certain cases does not give people the confidence that if they invest on the basis of a particular policy paradigm that policy paradigm would hold to see X amount of years.
And that's why you would see there would be no response to this scheme (disclosure scheme under the Black Money Act).
Q. What are the provisions of the law which can deter people from coming forward and disclosing their assets?
A. The court can tomorrow say lift the veil of secrecy, the court can say that why do we need to offer amnesty to someone who is an offender, why don't we instead prosecute them. So, the people who are today the beneficiary of the process, tomorrow can become victim of the process.
The only way of doing it is you get information, you process the information and then you take action against the offenders. Or you offer a general amnesty, which is then approved by both houses of the parliament because the legislation has little more weight than just an executive notification.
The whole process is quite skewed. We talk about black money abroad, what about the black money in India. Real estate is the biggest consumer of black money. If the government is serious about curbing black money, they should start looking at the real estate players and developers.
This obsession that India has with black money abroad is completely and absolutely exaggerated. And for some strange reason nobody is ready to talk about the huge amount of black money invested in India, which is in fact easier to clean up because you do not have to get information from a sovereign nation, you do not have restriction on how to use that information, but in the case of black money in India there are no such restrictions.
So, when the BJP ask its MPs to sign declaration that they do not have any black money abroad, why doesn't it ask MPs to sign similar declaration saying they have no black money in India?
Q. Do you see anything positive in the act?
A. The efficacy of a law depends on the results it is able to achieve, and according to me this law would not yield the desired result for the reasons that I outlined earlier. And therefore, the only option left before you is to go after the domestic black money in a big way and make a few example out of some of these real estate barons, whose investments and source of the fund have a clear disconnect. That gap, though a forensic audit, is not very difficult to find.