Can India Recover $500 Billion Black Money

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Government enacted- Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
The government provided a window for one-time compliance – between July 1 and September 30 in 2015 – for taxpayers to declare their undisclosed foreign assets.
Around 650 persons made declarations of the undisclosed money worth Rs 4,100 crore deposited in foreign banks.

BACKGROUND

A high-level advisory group (HLAG) was formed in September 2018 under the Ministry of Commerce and Industry.
The group — led by Surjit Bhalla, a former member of the Prime Minister’s Economic Advisory Council.
The group was formed to provide recommendations to boost India’s trade.
The report has been released recently.
It has proposed to issue a type of long-term government bond to those with undisclosed wealth.
The money collected via this mechanism to be used towards funding infrastructure projects in the country.

A bond is a fixed income instrument that represents a loan made by an investor to a borrower.

It is an avenue for people to bring their money stashed offshore without fear of being prosecuted.
Once they declare their offshore money, they will be asked to invest 40% of that amount in these elephant bonds.
A fixed coupon security will be issued.
Of the amount invested in the bonds, the HLAG has recommended that 75% of the interests earned be collected as tax.
45% of the wealth brought in by subscribing to these elephant bonds will be credited with the depositor.
The remaining 15% will be collected as tax deducted at source by the government.
One of the key features of the proposed mechanism is that.
Those disclosing their black money will receive “immunity from all laws including under Foreign exchange, Black money laws and Taxation laws
So basically, It is like an Amnesty scheme to help State treasury raising tax revenues, adding beneficiaries in tax base who have not declared their assets previously.

“Countries around the world are now co-operating in a crackdown on black money, and this provides a perfect opportunity to escape from illegal (black) money,” said Bhalla.
He also added that those with undisclosed wealth would only be paying 15% tax and no penalties.

The HLAG estimates that creation of elephant bonds could help fund (approximately) $500 billion worth of infrastructure projects.
If we get even $300 billion, that would solve our infrastructure finance problem and finance the gap between investment and savings.
It will also have a tendency to strengthen the rupee.

Countries like Indonesia, Pakistan, Argentina and the Philippines have already launched their own tax amnesty schemes for persons to disclose undeclared income without the risk of prosecution.
Indonesia, which had launched its tax amnesty scheme in 2016, received declarations of hidden assets valued at $367.9 billion from around 9,70,000 participants during the amnesty period.