A 2019 Comptroller and Auditor General report has brought out glaring irregularities in the exemptions given to agricultural income for income tax purposes. Exempting large income on agriculture from taxation not only makes the agricultural sector a conduit for money laundering and concealment of black money, but also holds back the much-needed modernisation and reform of the sector. Although everyone agrees on the desirability of taxing agricultural income, successive governments have shied away from it for electoral reasons.
The Government of India’s justification for removing any distinction between a permanent account number allotted based on the Aadhaar and one allotted based on identification documents other than Aadhaar is examined. The government claims that this measure will end black money and money-laundering. Whether Aadhaar linkage to PAN truly identifies those holding financial instruments and undertaking financial transactions and whether it will save India the embarrassment of incorrect reporting as part of the nation’s Foreign Account Tax Compliance Act and Common Reporting Standard obligations are explored.
Estimate of illicit financial outflows and the demand to repatriate these are fraught with issues. First, there can be reversals in direction of flows of illicit money thereby making it tough to ascertain undeclared wealth held abroad. Second, even if the money is traced by the authorities of country, institutional impediments may prevent repatriation. Third, once such money is repatriated it may be more useful to employ these to set up trade transparency units.
