Govt may lower stamp duty for real estate deals to curb black money further
NEW DELHI: Tightening the noose further around black economy, the government may abolish discretionary powers of tax officers in deciding liabilities for evasion, said NITI Aayog Vice-Chairman Arvind Panagariya.
He also hinted that stamp duty for real estate dealings may be eased with a possible rise in on-the-book property deals in the wake of the ongoing crackdown on unaccounted wealth.
“We have to also go back and begin to think much more seriously about a whole set of tax reforms, which would both bring in simplification and precision in the definition so that you reduce, and hopefully even eliminate, discretion of tax officers on this matter,” Panagariya told private TV channel India Today in an interview.
Panagariya, a former chief economist of the Asian Development Bank, was responding to questions on possible follow-up measures to the November 8 announcement of ban on 500 and 1,000-rupee banknotes.
“A lot of evasion of taxes happens when there’s too much discretion on the part of officers. So, we need to simplify,” he remarked.
“Simplification”, he explained, “would mean doing away with (tax) exemptions. In addition, (we need to) also define situations much more precisely so that it leaves no room for discretion for the tax officers to decide whether under such and such situations you are liable to tax, you are not liable to tax.”
The government, Panagariya said, is beefing up enforcement against tax cheats in the real estate sector. At the same time, concerns over the high rates of the stamp duty should also be taken care of, he suggested.
“On real estate, we need to begin to enforce it better. But we need to address the issue of stamp duty. Is it too high?” he asked. “If the transactions are going to come in white, probably the amount for which the transaction is taking place would rise.”
Asked whether he foresaw a drop in stamp duty, Panagariya answered “that’s something we ought to have on the table”.
The NITI Ayog chief stoutly defended Prime Minister Narendra Modi’s demonetisation of the country’s biggest notes, which has come under heavy attack from a host of economists, including former prime minister Manmohan Singh.
“Stamping out corruption on a large scale has not been tried in a developing economy in the past,” Panagariya argued. “This is the first time, where in a developing economy, a Prime Minister says that look we got to do a clean-up job here and systematically proceeds to do that.”
He described Modi’s currency ban as an “essential step”. “This is the first time an economy has tried to do the clean-up job. What the step has been taken is an essential step. It is not the last step.”
Panagariya rejected Singh’s fierce criticism of the abrupt scrapping of high-denomination bills, saying the former prime minister had given no evidence to back up his contention.
“I really wished that the former prime minister Dr Manmohan Singh had also given his arguments very clearly why he thought this was loot, why he thought this was plunder. I really don’t know what his arguments were, so I really can’t quite address them in an informed sort of way,” Panagariya said.
He also disagreed with Nobel laureate Amartya Sen’s harsh observations that the demonetisation was a “despotic action”.
Panagariya insisted that the government followed laid-out norms before it outlawed the banknotes. “Also, by He also disagreed with Nobel laureate Amartya Sen’s harsh observations that the demonetisation was a “despotic action”.the way, a despotic action should create some uproar from the public to the Opposition. The public sentiment has been quite the contrary actually. I really don’t quite appreciate in what sense it was a despotic action,” he wondered.
He, however, acknowledged that Modi’s measure will slow down economy at least in the last two quarters of the current fiscal, but claimed that growth would recover rapidly in the next financial year.
“I think we’ll see some decline in the third quarter. Some bit of less than what will happen in the third quarter will happen also in the fourth quarter. But whatever losses happen in this particular year in aggregate are going to recover in a big way as we go into the next year and the following year because this ultimately is going to have a major efficiency-enhancing impact on the entire economic system,” he reasoned.
Panagariya, however, refused to forecast any figures for 2017. “I will not indulge in any number crunching on this. This is a difficult thing to do in the absence of any quantitative evidence.”
Meantime, discussions were also under way to boost the government’s efforts to digitise all financial transactions, he said. A committee of state chief ministers has already been set up to execute that programme, which he indicated might eventually incorporate funding of political parties.
“If we have to capitalise on the benefits of what has been done on November 8, this (digitisation of transactions) is one thing we have to promote in a huge way,” he said.
Panagariya also spoke about the possibility of slashing down Customs duty on gold imports.
“We perhaps should also look at the Customs duty on gold because that also brings gold illegally. If the Customs duty is too high, there’s a very long history of gold smuggling into India. And if gold comes in illegally, then it’s also transacted illegally, that of course again gives rise to black money,” Panagariya explained.