The fact that the new law allowed wrongdoers to voluntarily disclose their foreign assets on a one-time basis and pay the requisite fines indicate that the government is not so sure that it can get the black money back to India. New stringent laws can never prove to be the only deterrent against the black economy. The reason: the culprits are always ahead of them. What is required is the implementation of the laws. Jaitley should have focussed on the latter, and not the former.
Not surprisingly, the economic criminals have already found an easy way to escape the provisions of the new law. The Ambit report quoted earlier said that several mid-level Indian businessmen have taken “tax residentship” in other countries. They will not have to pay taxes in India and, hence, need not be bothered about the income tax authorities. Others, including the big ones, have decided to do the same. High net worth white-collar professionals, who work with leading multinationals (mncs), have decided to seek transfers to other countries.
When Pranab Mukherjee, the then finance minister, announced retrospective tax in his budget speech in February 2012, Jaitley was its biggest critic. Other bjp politicians said that Mukherjee’s decision was retrograde and would scare away investors. After becoming finance minister, Jaitley continued his attack against the issue. In his second Budget in February 2015, he deferred Mukherjee’s move.
So, about 100 fiis were taken aback in April 2015, when the income tax department asked them to pay $6 billion in taxes for the past six or seven years. Jaitley defended his department. He maintained that “taxes which are payable must be paid”, and these should not be perceived as ‘tax terrorism’. He added that India was not a tax haven, and doesn’t intend to be one. Thus, fiis have to pay legitimate taxes.
The investors countered Jaitley; they withdrew money from the Indian stock markets. Indian equities witnessed huge volatility and the stock market indices yo-yoed wildly. A hassled Jaitley tried to assuage the feelings of the fiis. He set up a committee to look into the issue and submit its report within a month. In early May 2015, the income tax authorities said that they would not send any fresh notices.
A week later, the fiis got a jolt when the dispute resolution panel of the income tax department informed them that the hearings on the disputed taxes for the past few years would start. In the ongoing chaos, the damage was done; most investors felt that nda-2 was on the same page as upa-2 in terms of tax confusion.
LONG TAIL OF RETAIL
While in opposition, the BJP opposed FDI in retail. The Sangh Parivar was even against the presence of multinationals in e-retail. Over the past 12 months, NDA-2 has not reversed UPA-2’s policy to allow 51 percent in organised retail. A few weeks ago, the Department of Industrial Policy and Promotion issued a notification that said that FDI was indeed allowed in retail.
When confronted with the contradiction, Jaitley said, “Our political stand is clear on FDI in multi-brand retail. We are not in favour of that.” A day later, Commerce Minister Nirmala Sitharaman warned foreign retailers that the government would oppose their entry, even though the existing policy allowed it. She said, “FDI in multi-brand retail cannot go in direct route. Every decision has to come to the cabinet. We will not allow it. I have not cleared a single proposal yet.”
Why doesn’t the government reverse the FDI policy in retail? If it is not going to clear any proposal, why does it continue with upa-2’s policy? The answer was provided by a BJP spokesperson, “The government will not change the retail policy because it would affect the investment atmosphere as investors wanted to see continuity in policy.” This was a lame excuse in the context of Jaitley and Sitharaman’s statements.