1. The core principle in income tax is to account for the assets and wealth one holds, and pay taxes.
2. The Indian income tax laws have enough teeth to go after the tax evaders, but they don’t, and in a capital-starved economy, this is a shame.
3. There are three problems that this environment of unabashed thievery unleashes.
4. Firstly, consistent demand from unaccounted cash economy keeps asset prices high, as they don't respond to monetary policy, interest rates or other supply-side factors.
5. Secondly, vested interests begin to control supplies to ensure that prices don't correct easily.
6. Thirdly, black money persistently seeks loopholes to exploit and be turned to white, so it is available to invest and use more freely.
7. It is still common for companies to create a web of entities, use complex transfer pricing and questionable accounting practices, and manage to both avoid and evade taxes.
8. Without a culture of compliance, trying to get capital into genuine enterprises remains tough.
9. There is also the eagerness to ‘invest’ black money and earn a market return, and the demands they make while trying to do so are audacious: high return, low risk and no tax.
10. If one loophole were to be plugged, another would be found, hurting genuine investors all the way.
11. Genuine economic activity that requires land and real estate suffers and reforms become tough due to entrenched vested interests.
12. Since a good part of hidden wealth has moved into gold, real estate and consumption, money for nation-building, augmenting supply in agriculture and industry becomes less, governmental income runs short of its needs, banking system remains smaller than it should be, capital markets that can channelise money into projects remain stunted, inflation, unemployment and inequality remain high, while capital investment and incomes become low.
13. To fix the system and make asset markets more fair and equitable, big bang reforms are required that enable genuine investment, job creation and entrepreneurship, and penalises hoarders and evaders.
2. The Indian income tax laws have enough teeth to go after the tax evaders, but they don’t, and in a capital-starved economy, this is a shame.
3. There are three problems that this environment of unabashed thievery unleashes.
4. Firstly, consistent demand from unaccounted cash economy keeps asset prices high, as they don't respond to monetary policy, interest rates or other supply-side factors.
5. Secondly, vested interests begin to control supplies to ensure that prices don't correct easily.
6. Thirdly, black money persistently seeks loopholes to exploit and be turned to white, so it is available to invest and use more freely.
7. It is still common for companies to create a web of entities, use complex transfer pricing and questionable accounting practices, and manage to both avoid and evade taxes.
8. Without a culture of compliance, trying to get capital into genuine enterprises remains tough.
9. There is also the eagerness to ‘invest’ black money and earn a market return, and the demands they make while trying to do so are audacious: high return, low risk and no tax.
10. If one loophole were to be plugged, another would be found, hurting genuine investors all the way.
11. Genuine economic activity that requires land and real estate suffers and reforms become tough due to entrenched vested interests.
12. Since a good part of hidden wealth has moved into gold, real estate and consumption, money for nation-building, augmenting supply in agriculture and industry becomes less, governmental income runs short of its needs, banking system remains smaller than it should be, capital markets that can channelise money into projects remain stunted, inflation, unemployment and inequality remain high, while capital investment and incomes become low.
13. To fix the system and make asset markets more fair and equitable, big bang reforms are required that enable genuine investment, job creation and entrepreneurship, and penalises hoarders and evaders.