It is both. First step is drive black money out and into the banking system. Second step is to make sure accumulation of black money becomes much harder than it was before. This is where digital economy comes in. Of course people will still find ways to launder money, but with most of the big transactions being done electronically it will be much easier for taxation department to track and detect these transactions.
Read what KV Kamath said in the interview.
Some say the move is a failure since almost all the currency would be back, including the black money…
There was a talk that one-third or one-fourth won't come back. But that to me was before the tax scheme on unaccounted deposits was announced. There is a lot that has been deposited. From an outside view, a large amount got deposited after that. How much of that is going to be taxed? I guess, a large part may come back. It is better to get it taxed and have a quarter of it now, and a quarter on a time-adjusted basis rather than none of it. I would be surprised why would anyone not put back the entire thing and not pay tax on it. I don’t think it is a failure. If nothing is taxed, we would need to understand how it managed to escape tax. I am sure it would be taxed.
Is there fear that the tax authorities become too powerful?
Any honest tax payer would welcome better tax compliance and authorities will be assisted by technology.
Even today, high-value transactions are tracked and it is the system that is throwing it out. I am sure you can now change the filter of where you want to track it. The difference is digital money can be tracked real time. You can real time assess what is the transaction size, which PAN card did it and what is the returns this PAN card has filed and say that this doesn’t look kosher. It doesn’t require human intervention. There are so many ways in which transactions can be tracked down to where it has been done. The tools are clearly there today with the government for a cleaner setup.
Read more at:
http://economictimes.indiatimes.com/articleshow/55949303.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Having said that, there is lot more that government needs to do, to make sure digital transactions actually work. Improving the digital and banking infrastructure is a must.
Government could have been better prepared, but the whole idea was to keep this move a secret so that the black money hoarders don't get the time to launder their cash. Printing of the newer currency in advance, or recalibration of ATMs in advance would have leaked the information about the imminent demonetization and would have made this whole exercise redundant.
If you look at the previous steps, Jan Dhan Accounts, IDS and then came the demonetization, it all adds up.
Of course as I said, no one is denying that the common people aren't facing problems, they are, but those problems will go away eventually. Arun Jaitely has said there will be a massive infusion of cash in the coming three weeks and that should ease the pressure off at the banks and ATMs. Once people have enough cash in hand, they ll be more than happy to adapt to the digital economy.
