NEW DELHI - Indian Finance Minister Arun
Jaitley on Monday unveiled a scheme to give tax dodgers another
chance to come clean, as he sought to bring billions of dollars
worth of undeclared income into the mainstream economy.
The move follows Prime Minister Narendra Modi's decision to
scrap 500-rupee and 1,000-rupee banknotes in a bid to flush out
cash earned through illegal activities, or earned legally but
Under the proposed scheme, a person making the declaration
would have to pay 50 percent in taxes and surcharges. The
individual would also have to park a quarter of the total sum in
a non-interest bearing deposit for four years.
While Jaitley expects the scheme to discourage tax evaders
from laundering their ill-gotten wealth, experts said there was
no better alternative to sweeping tax reforms.
"Since it offers clarity on how unaccounted cash will be
taxed, it can help in cleaning up the cash economy," said Vishal
Malhotra, a tax partner at Ernst & Young.
"But you must follow it up with a drastic reduction in tax
rates to improve compliance."
In the first week after India's so-called "demonestisation"
drive, banks received $74.2 billion in fresh deposits. Analysts
at HSBC expect the deposits to swell by $164 billion by
The surge in deposits, particularly in previously empty
accounts, has alarmed tax authorities who fear poor account
holders are being lured into laundering money on behalf of
big-time tax evaders.
The new scheme comes barely a month after a similar drive
managed to unearth $9.5 billion in undeclared income and assets.
But with cash estimated to make up just 6 percent of illicit
wealth, the disclosures might not be of the same proportion.
Last year, an amnesty aimed at unearthing foreign assets
fell short as fewer than 700 people availed of it, paying about
$364 million in taxes.
Modi's administration has billed the "demonetisation" drive
a "surgical strike" on black money, which has sucked out 86
percent of cash in circulation and pushed Asia's third-largest
economy to the brink of a liquidity crisis.
Opposition parties led by Congress have stalled parliament,
demanding a reply from Modi and compensation for the families of
dozens of people reported to have died while queuing at banks to
swap old money for new.
On Monday, they took to the streets protesting against
Modi's decision to cancel 500-rupee and 1,000-rupee banknotes as