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Rediff.com
Govt explores bonds to tap black money
P Vaidyanathan Iyer in New Delhi | June 30, 2004 | 08:13 IST
The finance ministry is exploring the option of launching long-tenure
bearer bonds or infrastructure bonds to unearth unaccounted money and use
it to fund the country's development needs.?
According to government sources, unlike the Voluntary Disclosure of Income
Scheme, 1999, the bearer bonds will not provide amnesty to tax evaders.
While the revenue department would not seek any details on the origin of
funds being invested in bearer bonds, it would be free to go after money
launderers in the future, they said.?
The funds raised through the bearer bonds could be locked in for a long
tenure, say 10 years, the sources said. Tax experts noted that the Centre
could offer a nominal interest on the bonds.?
"Such a scheme can partially suck out the unaccounted money in circulation
and simultaneously help the government fund its development programmes," a
source said.?
While the ministry possesses only dated information on the quantum of black
money in the country based on a study by the National Institute of Public
Finance and Policy in the early 1980s, independent estimates put the figure
at as much as 40 per cent of the gross national product.?
Tax experts said except for VDIS 1997, other amnesty schemes failed to
generate a response.?
Five amnesty schemes in the past have yielded not more than Rs 700 crore
(Rs 7 billion), they pointed out, adding that Yashwant Sinha's Kar Vivad
Samadhan Scheme, too, came in for severe criticism from the Comptroller and
Auditor General.?
The experts noted that a bearer bond scheme was last launched in 1980-81
when R Venkataraman was finance minister. The scheme offered an interest
rate of 2 per cent and the money was locked in for 10 years.?
The Congress government under Indira Gandhi had raised almost Rs 1,000
crore (Rs 10 billion) then, equivalent to Rs 10,000 crore (Rs 100 billion)
at today's prices.?
The National Democratic Alliance government, too, had discussed a bond
scheme two years ago to raise funds for the infrastructure sector.?
Preliminary discussions were held with some financial institutions but the
idea was dropped later due to lack of consensus.?
The United Progressive Alliance's Common Minimum Programme unveiled in May
too had called for introduction of special schemes to unearth black money
and assets. This was being seen as an additional measure to increase tax
revenues.
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R. A. Hettinga