Comparing income disclosure schemes of 1997 and 2016

If one takes number of people who declared their black money, Chidambaram’s scheme received far wider number than the current one. But in terms of amount of money declared and tax (estimate) collected, then Jaitley’s scheme is bigger.

That’s not the correct way to compare as Chidambaram’s scheme was implemented 19 years back. So if we bring that number to today’s value, then how it would look?

 

We used compounding rate of 10%, then Chidambaram’s scheme would comfortably beat the current collection. One can always dispute the compounding rate. If 6% is used, then tax collected would be less than what is estimated under IDS 2016.

 

Beyond the numbers are two crucial issues:

 

  1. The inability of tax authorities to actively curb black money generation. It is not common to hear people demanding cash payment while buying or selling houses.
  2. Regular disclosure scheme emboldens people to indulge in tax evasion as probability of getting caught is less than the return from tax evasion.

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