Tuesday, October 6, 2015

SEBI, Income Tax Dept and the black Money.

Both SEBI and Income TAx Department have to bear the responsibility for allowing generation of black money and they have to jointly initiate  innovative action to fix the problem. The round trip through promisory notes can be easily avoided if SEBI and IT department decide to be vigilant through proper scrutiny of transactions and track them with intelligence inputs using the IT technolgy.

Further, there are mushrooming growth of subsidiary companies under some holding Companies and the intentions behind having huge number of subsidiaries are nothing but to mix up the black money generation with white money and intentionally avoiding  the trace of it through  showing heavy losses. With such subsidiaries , the holding Comany and the subsidiaries fool the investors and the tax department as well and allow the promoters and directors thrive right royally. No one can have a proper track of transactions and the accounting jugglaries these holding and subsidiary Companies resort to are beyond comprehension and  even the best accountancy brains cannot have a track of transactions they mutually undertake. Here again SEBI and Income Tax department can take some joint action to enure that there are genuine needs of such subsidiaries and they are not set up to hoodwink the Investors and Income tax department without any solid contribuition to the economy. The banks financing these companies also need to be involved as the holding companies and the subsidiaries together can play tricks with bank finance and help themselves and the banks to camouflage NPAs. 

With regard to evasion of  Long term capital gains, the only way to fix thiis without hurting any one is to  have a dynamic use of the Share Transactoion Tax  both on the purchase and sale of shares. The levy is made then and there and the Government can do away with the Capital gains tax. STT on purchase and sales can be different and it can also be different based on the period of holding. Administratively it is convenient to augment the revenue and the ethical deficit now felt in avoiding and evading capital gains tax can be avoided comfortably. There are ways to fix all the problems and the authorities have to be prepared from the angle of ease of doing business and augmenting revenues ensuring total compliance to the ethics desired in business. The economy and all the stake holders would be the ultimate beneficairies and the stock market can be healthy in the long run.   

Dr T V Gopalakrishnan

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