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.
