Note ban, GST to make 'cash deals' tough, widen tax base: Jaitley
Putting up a spirited, fact cum analysis-filled defence of the Union Government's demonetisation and GST gambles, Finance Minister Arun Jaitley said on Saturday that both these landmark policy moves would make cash transactions a lot more difficult and lead to greater compliance as well as expansion of the tax base.
Speaking at the Delhi Economics Conclave organised by the Finance Ministry, he said that the Government has come out with laws to contain overseas black money as well as those dealing with domestic black money and cracking down on shell companies.
The minister said that the country had reconciled to a Indian normal — a very large number of tax non-compliance and very large amount of transaction which took place outside the system.
"There was almost a helplessness in trying to deal with the situation. Every year through the Finance Bill we would announce some changes which at best had a marginal impact. I think the lasting impact of those marginal changes was not very significant.
"And therefore, steps had to be taken in order to make a very significant impact," he said, adding that seen in totality, the steps taken by the government will have a "great long term impact" and a "substantial ethical rationale" behind it.
"The net impact of the demonetisation exercise coupled with the GST exercise, which is going to make generation of cash a lot more difficult, will certainly lead to greater compliance, greater digitisation. And the first signs of greater digitisation, expansion of the tax base of direct and indirect taxes is already visible," Jaitley said.
He said that the first significant step taken by the government, which shook the system, was penal action against those who stashed money abroad. He said one easy format of subversion has always been the shell companies, which are created by multi-layering of companies. "This had almost become standard operating procedure and this was not only used by businesses but was used to round trip corruption money by politicians, by civil servants," the minister added.
Jaitley said that not only the detection of this but the decision to invoke the benami property law in acquiring these assets by the state is going to be a big deterrent and already revenue department has started doing that.
'Govt working on poll bonds… no political party has responded''
The government is "actively working" on the electoral bond mechanism, Finance Minister Arun Jaitley said on Saturday. For the last 70 years India's democracy has been funded by invisible money and elected representatives, governments, political parties, Parliament and even the Election Commission (EC) have completely failed in checking it, he added.
As per the electoral bond mechanism announced in the Budget, the proposed bonds will resemble a promissory note and not an interest-paying debt instrument. They will be sold by authorised banks and can be deposited in notified accounts of political parties within the duration of their validity.
In a major move aimed at promoting transparency in political funding, Jaitley had in this year's Budget speech announced capping of anonymous cash donations to political parties at Rs 2,000 and introduced electoral bonds. "I asked political parties, both orally in Parliament and in writing, to offer a better suggestion to me. Not one has come forward till date because people are quite satisfied in the existing system," he said.