Black Money: Don’tjump to conclusions

Banking secrecy in Switzerland is no longer the impenetrable veil it used to be. Switzerland is not exactly the first choice of those with money to hide. That is reason enough to not take the black money scare following reports of a huge spike in deposits by Indians in Swiss banks to Rs 20,700 crore by the end of last year from Rs 6,625 crore at the end of 2019 too seriously.

All Swiss accounts are not illegitimate, and it is wrong to pressurise holders of legitimate accounts with tax-compliant deposits. The spike in deposits could be temporary due to pending payments or investments. Many deposits could also be of nonresident Indians who do not have to pay tax on their foreign income earned during the year they have been non-residents.

Rightly, India has used the diplomatic channel to ascertain the relevant facts from Switzerland that is sharing financial information of accounts held by Indian residents in Swiss banks from 2018 under the automatic exchange of information pact. However, instead of using strongarm measures to chase accounts of Indians that could well be legitimate, the government must make the fullest use of our information technology prowess to establish audit trails on financial transactions and assiduously mine the data generated by the goods and services tax (GST) to follow and hunt down the income that evades tax.

A more realistic project evaluation while sanctioning bank loans is also the key to stemming black money. In the past, banks sanctioned loans at inflated project costs and promoters siphoned the padding to tax havens. Arm’s-length financing of projects through bonds is another way to reduce black money. Cleaning up political funding would underpin it all. The solution is at home, not on Alpine slopes.

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