Black Money – Domestic and International Efforts

[op-ed snap] Inaccurate diagnosis, draconian remedy


From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Tackling black money in India


India’s fight against foreign black money is unfinished. 


  • The problem itself was misdiagnosed.
  • The legislative measures are bereft of constitutional and economic common sense. 
  • They relied too little on persuasion, and too much on browbeating.

State of Black Money

  • Black money Law: tax rate – At the minimum tax rate of 60%, the law has less incentive for the hoarders to come clean. 
  • Stats – As of May 2019, the total untaxed foreign assets mined was ₹12,500 crore. 
  • Recovery – Even this recovery was aided greatly by international exposes such as the Panama Papers.
  • Indonesia – Indonesia recovered about ₹25 lakh crore under similar schemes.
  • Tough laws – government passed an even more confiscatory law, the Fugitive Economic Offenders Act.

Existing laws

  • Income Tax Act – is provided for up to three times the penalty on escaped tax. 
  • Willful attempts to evade taxes have been punishable with imprisonment of up to seven years. 
  • Automatic exchange tax information – under a protocol for, India is now receiving data from Switzerland.
  • An amendment requiring all citizens to disclose foreign assets with their domestic tax returns.

Post-May 2014 tax control policy

  • It is different only in three aspects, all constitutionally suspect.
  • Retrospective application of tax and penal laws are so confiscatory and discriminatory that they walk over a citizen’s right to life, carry on business and own property. 
  • Shifting the burden of proof onto the citizen to establish that he is not an offender. 
  • Citizens can be subjected to criminal trials without the taxman proving that there has been tax evasion. 


  • Enforcement Directorate secured a conviction in less than 1% of the case but attached assets worth ₹29,468 crores. 
  • The agency’s equivalents in the U.S. and the U.K. secured a conviction in about 50% cases. 
  • Income Tax Department’s records show near 2% conviction rates in Financial Year (FY) 2016-2017. 
  • Comptroller and Auditor General report showed that in FY 2016-2017, the number of raids more than doubled, as compared to FY 2013-2014. But in the same period, the undisclosed income detected was less than one-fourth the amount during the latter period.

Black money estimates

  • No clear estimate of black money owned by Indians and stashed abroad is available. 
  • Between 2008 and 2012, various reports quoted anywhere between $500 billion and $1.5 trillion relying on estimates of a Swiss Bankers Association (SBA) report.
  • James Nason, an officer of the SBA, has said that the SBA had never published any such report. 
  • In 2019, the National Institute of Financial Management reported to the Lok Sabha Standing Committee on Finance, that the estimate is about $216 billion-$490 billion. This is one-seventh the estimate quoted ahead of the 2014 elections. 
  • Misdiagnosed – India’s foreign black money problem was misdiagnosed and unverified, exaggerated numbers went into satisfying Parliament that draconian financial laws are justified.

Taking cognizance

  • Demonetisation – it is labelled by international media as a ‘massive theft of people’s property’.
  • The announcement that ₹15 lakh will be deposited in each citizen’s account was found to be a political bait.
  • Being an intrusive, browbeating confiscator does not enrich Indians. It doesn’t.
  • The draconian fiscal laws must be repealed.
  • Increased international cooperation, technological advances, and banking penetration implode black money more than any law or sermon on patriotism.
  • India’s war on black money can only be won through democratic, persuasive and economically-sound means.
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