India’s tax evaders can keep half their hidden wealth… if they declare it.
A change to the country’s income tax laws pushed through parliament Tuesday requires hoarders of untaxed income to hand over 50% when they disclose it to the government.
They have to deposit another 25% into a government fund — aimed at generating cash to spend on the poor — which they can get back after four years.
The rest they get to keep.
If they don’t come clean and are subsequently caught by tax officials, they’ll lose 85% of their illicit wealth.
The move comes just three weeks after India abruptly scrapped 500 and 1,000 rupee notes in an attempt to flush out tax evaders holding billions of dollars worth of what Indians call “black money.”
The two high-denomination notes make up 86% of India’s currency, and their removal has sent shockwaves through a country that uses cash for over 90% of its transactions.
The new tax law should ensure that even the 50% of income hoarders get to keep will enter the banking system, the government said.
But India has granted similar tax amnesties before, with little success. An attempt earlier this year to persuade tax evaders to reveal their true wealth prompted declarations of just $9.8 billion.
That’s a tiny fraction of what the Indian government should be getting, with hundreds of billions still believed to be stashed abroad. Only 2% of Indians pay any income tax at all.