These days, in India, the flavour of the month is black money. The ire seems to be directed (thanks to a popular yoga practioner's antics) against black money stashed abroad. Apparently in Switzerland and Lichtenstein. This yoga practioner claimed that if all the black money stashed abroad were to be brought back, it would signal the end of poverty. The Supreme Court, in another case of judicial overreach, is directing the action on naming and shaming those who hold accounts in the aforesaid countries.
A pause to consider what is black money is in order. Black money is that income on which taxes have not been paid. If this is what black money is, in India, it is right under our noses. Forget about Lichtenstein. It is in every house. The largest generator, washer and lubricator of black money in India is the property market.
When I buy or sell a house, or land, I suffer two incidences of taxation. One is the usurious rate of stamp duty. The second is the perfectly reasonable rate of capital gains tax. I don't want to pay both. You see, taxes are somehow a very good thing when imposed on others and a very bad thing when imposed on me. After all I don't earn all that much and its not "fair" that I should be asked to cough up taxes when those politicans and businessmen are making millions. So its ethically very fair that I evade taxes on my propery transaction.
So what do I do ? I buy a suitcase. Stuff it with cash. Formally, on the contract, the property is being sold and bought at 50% of the real value. Voila - stamp duty falls by half and capital gains tax either disappears or is only a minimum. The balance is paid via the suitcase with a wink and a nod, thereby contributing to the sustained growth of the luggage industry. The recipient presumably stores this suitcase in the loft. And when the time comes for him to buy some other property, the suitcase passes on.
I am willing to be provocative and say that every other guy who has bought or sold property is a generator of black money. Everybody in India is on this loot. And its not just the rich. When land is acquired from the "poor farmer" for a factory to come up, you think he pays his taxes ? Bollocks. His logic - he is "poor" after all; so why should he pay taxes - let the rich pay.
Wealth in India is largely in the form of property. Our own wealth is largely in property. Examine every legislator's wealth and its largely in property. And with evasion of taxes so rampant in the property market, most of us are the creators of black money.
Its an uncomfortable truth. But Lichtenstein can wait. If we want to really unearth black money, we have to pull out and empty our suitcases.
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12 comments:
Ha ha. Yep! Real estate reels with these suitcases.
In this context, I actually feel very proud of the findings at the Padmanabha temple. The foresight of the Kings to hoard so much of wealth in their temple vaults for exigencies.They created their own swiss banks in a way. Black or white, all in gold!
black moneynaalay people think it applies only to those amount which runs in crores. First antha mytha udaikanum. some time back getting gold into india had severe restriction. Every day dd newsla..ivlo kilo gold seizednu desin designa pose set panni news varum. PC raised the gold intake level to some kilos and ipolaam antha mathiri news varathu has reduced. Either that or the smugglers have become clever. Athey pola..registeration amt..charges..ithelaam kammi panna..people wud atleast think of admitting 70 to 80 percent of the real amt and black wud be less darker in shade.
People buy gold, TV's from elsewhere when they get into India. Anything worth above 25000 is taxable. But what do we do? If it is gold, we WEAR it (giving an impression that it is used one), and argue with the customs guy for the tax on TV, only to later brag about how we managed the customs guy and paid less. The beauty of this is: We sit in our couches and criticize about how some millionaire managed to earn crores unlawfully. Only unlawfully, and who made the law??????
They say, Sg is corruptionless, the way I see it is: Sg has legalized things....(just as Gils mentioned above).
IMHO, I think as long as it is not corruption of policies, we need not make a huge hue and cry over that.
@Hema - Not sure what the history behind that hoarding is. Perhaps its as you describe.
@Gils - I totally agree. Reasonable rates of taxation and compliance will be better. But look at capital gains tax - its now a very fair 30%. And still every property transaction tries to evade it. But you are right. Low rates of taxation and extreme penalty for evasion is the only way.
@RS - Yes, the gold example is perfect of how everybody creates black money and points fingers at others. Disagre that Singapore is corruptionless. It certainly has done the most to being it to a low level, but in a way thats a bit easier to do in a small state. But shady practices exist. Temasek for example is not a shining beacon of corporate governance.
I agree with what you say...
@Prats - Hey thanks.
I recently got fined for something like this...something abt the rent paid to me being taxable; my dear father who handles these issues didnt think it was neccessary to pay up;-P
The husband was hopping mad when he found out...I was more casual abt it;-D
p.s: read the 1st comment, not sure I agree. Will u post abt it..the husband says its a 'white elephant' for Kerala & the country.
Would love to hear ur views:-)!!!!
@Reflections - Ha Ha. You are too charming for anything black to stick to you !!
The temple story is one best avoided in a blog - religious stuff tends to instigate extreme views. On the whole I think its a Pandora's box opened.
Call it black or call it grey - the whole system is flooded with various colors of money. Property is one such form. Just to add to your point of tax evasion on property, let me tell you there are areas (mind you within Delhi) wherein apartments are allegedly owned merely by holding the keys to the apartments. Dare you ask about the ownership papers and broker will provide you 1000 reasons not to ask for it.
I never understood this concept of valuation of property. Don't know who and what drives the "fair value." IT Act did talk about the fair value. Huh - who cares.
P.S. - It is indeed fair to assume that all this black money gets invested in property by and large.
Nail on the head. So true. cant accept more.
I promise to reincarnate myself as Anniyan/Aparajithudu bring all people, who commit the above mentioned crime to justice, if only
1) All the government bus conductors pay back the change that is due, more especially the chennai ones
2) If the government wont force me to buy a ticket to hopeless hosur even to board the bus, when my destination is londenpet at united krishnagiri.
The government does loots from its very own people in more than one form. அரசன் எவ்வழியோ குடிகளும் அவ்வழியே!
@Vishal - Yes, Delhi is the very centre of the property mess. I am absolutely sure that not one property transaction in Delhi is clean.
@zeno - LOL. The reason the cnductor is demanding fare upto Hosur is to motivate you to go even further to Bangalore so that we can see a movie together :)
Yeah right why is that this never occured to me? Me coming to bangalore to watch a movie is very much possible. Lets ask Ram, the Senor. Or may be we should Senora to let him come with us ;)
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