There is typically a certain quality about a government “white paper”, namely the putting together of the available material on a given subject, and the menu of policy lines that may conceivably flow from these. In short, those looking to nail a problem based on information gleaned from a white paper are apt to be disappointed. This can be said to be true of the white paper on black money that was placed in Parliament on Monday. In part this explains BJP leader Jaswant Singh’s observation that the document appeared to be like the “bikini”, which “conceals all the essentials and reveals only the non-essentials”.
To the extent that the white paper does not name names and makes no effort to produce a smoking gun, the point made by the Opposition leader is not without validity. Indeed, it is unheard of that a white paper clearly delineates a specific course of action. But having said that, it is fair to say that the document just laid before Parliament does offer a glimpse of the nature of the problem that confronts us, although there is little here that would surprise the specialist.
However, at least we now know that based on some recent international data, India is 15th in the world in terms of outgo of unaccounted or “black” money, namely money that has evaded the tax net and has been parked overseas. The outgo is to the tune of about $100 billion. (To get a sense of the problem, China tops these estimates with an outflow of well over $2,000 billion.) Some of this tidy sum does “round-tripping”, and returns to the country, having entered the legitimate stream through subterfuges. Some of this involves investments made from places like Singapore and Mauritius, where the tax rates are minimal. An aspect of this is that in recent years the black money of Indians held in Swiss banks has been pulled out, to be transferred to tax havens (such as the Cayman Islands) or the countries mentioned above. It is possible to lay hands on the money in Swiss banks if there is a policy consensus on paying tax on the interest earned on those sums. This is where Parliament comes in.
The white paper gives an idea of the generation of black money in the system, and calls for reforms in the financial sector, including taxation and in investment instruments such as participatory notes, as well as in real estate. The document should have paid attention to drawing a nexus between the “supply side” of black money (business and industry), and the political class that draws on it for election and other purposes, and called for changes in election laws alongside financial reforms.