Money or actual cash earned legally or illegally has to travel long distances both within the country or across borders for legal or illegal uses. Such transactions are done through banking or legal channel or through the infamous hawala medium at a comparatively cheaper and faster means. The loss to the exchequer is enormous. The following two statements (in Sunday Times of India, Chennai, February 20, 2011) are to the point and fit for consideration in the light of total absence of transparency and accountability of money transfers.
1) "India must calibrate its approach to hawala. We should take lessons from countries like UAE, authorise hawala dealers and integrate them into the system. This will help curb the flow of money out of the system" K.P.Garg, (Income Tax Settlement Commission Bar Association).
2)"Corporates use hawala to park their money in tax havens because in India the tax rate is so high that nobody would like to part with 30% of their earnings in tax." Hitesh Arora, Charted Accountant.
Let us learn from other nations and improvise a system which could avoid the defects and account for the total transfers with the least cost.
Well the question is as how to ensure redistribution of income and wealth in favour of the most underprivileged and the downtrodden in the society. An inter-mix of both income tax and wealth tax should be done in such a way that the income is least taxed while the wealth of an individual or a family is determined easily and quickly with a modern tool available for achieving the above-mentioned goal.
The income is meant to be spent or saved for a purpose while at the same time we should allow the free play of the multiplier effect of the incomes generated in a particular year.
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