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Comment by rm2889 | Hacker News Reader

While this sounds great on face value, I doubt this'll solve the root of the problem. Why did we have so much black money in India? Coz people didn't want to pay taxes. Why didn't people want to pay taxes? Because they got nothing in return. Governments (esp Indian) have been historically self serving and power hungry. Tax money is usually either lost by PSUs loaning to the Mallyas of the world or other corrupt bullshit (overpaying for public infra, raw materials - contracts going to the highest briber etc.)

So unless that changes (more difficult than logistically declaring pieces of paper illegal), maybe people will start hoarding other stores of value in the future and figure out other ways to evade taxes. Am I being too cynical?

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That's a catch-22, and most often just an excuse used by people to self-justify.

> lost by PSUs loaning to the Mallyas of the world

That's at least loads better than the money never reaching the government as tax and thus never becoming a matter of public record. Such publicly recorded "corrupt bullshit" are significantly easier to fight than the silent menace of black money.

> Governments (esp Indian) have been historically self serving and power hungry.

Projecting past governments' performance onto the current one and keeping your money hoarded, means that this govt doesn't have enough money to do significant good, which in turn helps such people justify to themselves that "the government doesn't do anything with it anyway". Thus the catch-22.

While the Modi government is nowhere near some "Ram Rajya" (said phrase being part of the problem), it's at least taking several steps in the right direction, and placing a little trust in it to spend the tax money reasonably well seems like a gamble with pretty good odds at this point.

> Why did we have so much black money in India? Coz people didn't want to pay taxes. Why didn't people want to pay taxes? Because they got nothing in return.

Sorry, I don't buy this argument. People in every country, regardless of how good their government is, want to personally pay as little taxes as possible. If people in XYZ-Amazing-Country knew that they could reduce their personal tax bill by 30% in a way that's guaranteed to be safe, a huge portion of the population would take advantage of it too. It's a class Economics tragedy-of-the-commons problem.

So ? Are you saying we should pay taxes even if governement is wasting most of it ?

You know what would motivate me to pay taxes ? Crystal clear development plans with additional gurantees that It would not be used to support bloated bureaucracy and subsidies.

Also who said governements are the only one who has to develop infrastructres ?

No, you should pay taxes and make government accountable to it.

Which can be classified under "fix your government" but had we done that, we would not even be here.

Up until now governments have been in the background in exploiting its people. But today this has changed. I hope/expect this would pave way for small-limited-government movement in India.

This is the darkness before new morning.

It's a card you can play once and will only work against small businesses like restaurants and other stores that deal in cash. The big fish will get away as they most likely already have their money laundered and converted to other assets. They wouldn't be holding all their cash in a garage somewhere like Walter White :)

I think the one of the big reasons (if not the only one) of doing this is to be able to introduce notes of higher denominations as an anti-corruption measure without having to answer the critics about the sorry state of the economy.

Nonetheless, a good one time move against the small time tax evader. This is not going to work long term obviously.

What the government needs to do is to give incentives to tax payers and considerably lower the taxes. Only then people will start paying them. I know it is a bit of a chicken and egg problem but it's the government that has to initiate the process.

I think Indians are among one of the highest taxed citizens in the world if you count direct+indirect taxes vs social welfare offered by the state.

> They wouldn't be holding all their cash in a garage somewhere like Walter White :)

True but someone will get money in return. He will be the sucker.

> I think Indians are among one of the highest taxed citizens in the world if you count direct+indirect taxes vs social welfare offered by the state.

True only for salaried class. Business men and self employed virtually walk away paying negligible taxes. I have friends who pay negligible taxes as compared to I, yet they maintain a lifestyle well beyond what I can dream to afford and I am payed decently even by UK standards.

"...converted to other assets"

These is mainly real estate assets. A lot of this black money is laundered to the builders who in turn do not declare a large part of it. Thus my hypothesis that it is the builders that will be hit the most. I'm expecting a real estate market crash.

That would be nice. Finally people might be able to afford housing :D /s

Hey it's you! there's quite a bit that has been achieved by successive Indian govts on shoe string budgets.

We've had the green and white revolutions, the IITs and other edu programs, large medical programs, ISRO (and the sensing tech that comes with it).

This is from a once impoverished country which later had to deal with the fallout of weaker institutions, brain drain and corruption/dacoity/booth capturing and a whole host of problems that include terrorism and war.

Post 1991, once the economy improved there's been significant improvement in out fortunes/tax kitty allowing for many other improvements (not to mention economic freedom).

This argument comes up very often, even in other countries and its spurious on the facts (Indian facts above), and on the logic - taxation is not a choice.

Don't forget it's a chicken and egg issue as well - without funding you don't get services, which makes you blame the govt and not want to give them more funding.

Hmm as much as I'd like to agree with you, don't think its necessarily spurious on the facts.

https://en.wikipedia.org/wiki/Corruption_in_India

From another perspective, the Rs 1000 note was demonetized in 1978 as well to curb unaccounted money. More than 30 years later, we've had to do it again because the underlying problem wasn't solved.

https://en.wikipedia.org/wiki/Indian_1000-rupee_note

Maybe this time it'll work. Time will tell.

You can't compare 1978 with 2016. Removing 500 and 1000 rupee notes as legal tender in 2016 accounts to more than 80% of total cash circulation. This is huge. 1000 Rupee note was a very small percentage of cash circulation in 1978.

It will work for the current undeclared income. Soon people will begin hoarding the new currency notes. Or become wise and not stash money in currency.

Under the recent tax amnesty scheme if somebody had declared rental income, or business income, they will have to continue declaring it for years to come.

I personally believe that the bigger players in undeclared income are not keeping it in cash, they have assets bought in the names of trusted people, be it cars or properties.

And that is the difference here. Corruption is big players. Undeclared income was for avoiding taxes by mostly regular people.

Corruption had already found a work-around. And even if not, it was free money when they got it; they might not miss it. Regular people were trying to save 30 paise to a rupee that they earned, they will now have to pay it.

The current method is a way to fight black money. For corruption there are other ways, and maybe some will be taken.

> The current method is a way to fight black money. For corruption there are other ways, and maybe some will be taken.

"Black money" term is so misplaced, it should be untaxed ruppes. It wont affect untaxed assets (overeseas and here).

And guess who has most untaxed ruppes and who cant afford to lose any more ? Low/Middle Class. Good job Modi. You just alienated they very people who voted you in the office.

I too do not think this move alone would solve "Black Money" problem in long term, but it certainly will go a long way in setting a better trend.

> You just alienated they very people who voted you in the office.

All govts till now have been doing politically right thing, rather than morally right. If a Govt., for once, tries to go beyond the vote-politics and do what's right, shouldn't that be a welcome change?

> I too do not think this move alone would solve "Black Money" problem in long term, but it certainly will go a long way in setting a better trend.

Only if the problem is inadequate tax revenue, which is not the problem IMHO. Its tax spending.

> All govts till now have been doing politically right thing, rather than morally right. If a Govt., for once, tries to go beyond the vote-politics and do what's right, shouldn't that be a welcome change?

Not before coming up with better tax spending plan. I have never gotten my taxes worth nor I expect It now, irregardless of how much they take my money.

Don't justify your skirting the laws. Why don't you spend the tax you don't pay to the government to a charity?

I dont want to pay for what I am not getting. Is that so hard to comprehend ?

> Don't justify your skirting the laws.

Breaking laws ? That would be playing right in their hands. I would not give them the satisfication to confiscate my properties and lock me up.

Most of the tax goverments think they should but dont get are legally avoided. They have to be. Otherwise exodus would be catastrophic.

> Why don't you spend the tax you don't pay to the government to a charity?

First my money my rules. Second if the charties help me ofcourse I would for example EFF.

So please justify more of your extortion.

Brilliant. We need to introduce more Indians to the ideas of individual liberty and conservatism as it exists in the United States. By that I mean personal responsibility, limited government, free markets, individual liberty. The governments in India at every level (starts from municipality all the way to the Center) have been so deep rooted in their corruption that its imperative people understand there are alternates to Big Government.

> We need to introduce more Indians to the ideas of individual liberty and conservatism as it exists in the United States.

I would not describe USG as such. No government exploit small businesses like USG. Its the government that first adopted income tax in its current form and motivated other governments. But I digress.

In my observation only wars and natural calamities bring social changes. So the whole structure must fall down on its weight for people of India to see the light, despite it being delayed, it will come. Seeing the reponses here and in /r/india we are in full exploitation mode.

I for one not going to hang around. I have stopped thinking of myself as a citizen of a country but as a global citizen. If one country does not appreciate/respect me, I will move to another. See Flag Theory [1].

[1] https://en.wikipedia.org/wiki/Perpetual_traveler#Flag_theory

You really think that the Low/Middle class is the target here? Are the people hoarding crores in cash low/middle class?

Low/Middle class is indeed saving 30p per rupee. But they aren't storing them in 1000 rs notes, they are spending that to better their lives. This is really against Medium to big businesses, and rich people like jewellers, goldsmiths and builders.

> You really think that the Low/Middle class is the target here? Are the people hoarding crores in cash low/middle class?

Earning Rs 21,000/mo even in 2nd-tier cities are not uncommon. Your local small nookad shop (mom & pop shop) can easily clear that in one month. And most of them are not in system. So guess who just had their saving (hoarding? lol) evaporated ?

Those who have too much money, has money to hire tax experts. So IDK this really looks like anus-f__king at scale.

I think the intended target doesn't matter, because the collateral damage is much larger.

I am genuinely unsure as to how this will play out - I see the good intentions and the executional hazards.

Facts about the economy - it's largely unorganized. Meaning builders and jeweler are not as large as the people doing labor and other mom/pop transactions.

Being unorganized they don't have bank accounts (also ,exams that wealth is stored in assets like gold).

M1 money, is 27 trillion. If 60% of that is in 500/1000s that's 16 trillion. Which has become useless over night, and will disproportionately affect those unorganized people who aren't on the Internet or HN.

The other effect is that yes, people are going to be unable to do black real estate transactions. But this has happened before and it didn't end those particular transactions.

I'm guessing this will be a windfall gain for PSU banks and the exchequer.

> Don't forget it's a chicken and egg issue as well - without funding you don't get services, which makes you blame the govt and not want to give them more funding.

Tell me how the taxes government already has, doing ?

> We've had the green and white revolutions, the IITs and other edu programs, large medical programs, ISRO (and the sensing tech that comes with it).

Correct me If I am wrong, this does not even account for 1% of tax spending.

> This is from a once impoverished country which later had to deal with the fallout of weaker institutions, brain drain and corruption/dacoity/booth capturing and a whole host of problems that include terrorism and war.

No this is from 60 years governments who still havnt stop exploiting its people.

> taxation is not a choice.

The issue is not taxation. Its where its being spent. If I had more say, I will gladly pay more. But I hope you understand why I would avoid paying (as much as I can, and ofc legally) taxes if its not even being spent on me.

Indian governments (current & previous) has failed its people and its most undeserving of taxes.

> this does not even account for 1% of tax spending.

Yes, but there are a few other areas that take a major portion of the take spending which we forget to acknowledge in such discussions because it does not affect us muddle-class / affluent people directly - Defense, subsidy of urea and other rural benefits programs (yes, agriculture is in a mess and a lot more can be done but with the introduction of Aadhaar and Jan Dhan, things are looking up)

> Indian governments (current & previous) has failed its people and its most undeserving of taxes.

Yes the previous government had really fucked up (I tend to think UPA did a decent job in it's first term, it's the second term that they really got greedy and hence their state now), but we should give credit to the Modi government for a lot of the economic reforms of the past couple years.

Please note, I'm pretty neutral on politics and do not stick to one or the other camp. This govt. has messed up on a lot of the social issues (Beef bans and communal tensions, JNU student protest situation, Kashmir violence and many more).

However, on the economic front, India is really moving in the right direction - Focusing on Startups and business friendly policy changes, making brand India attractive to the world (FDI), passing the GST (massive task and looking to be implemented pretty quickly come April), introduction of UPI [1] (this will definitely move the country forward to a more cashless economy), integration of all the digital services (Aadhaar, Digital Locker, etc), black money declaration schemes and prosecutions (The situation on the ground is actually changing, people are much more scared of hoarding black money now) - These are just some of the things off the top of my head (Credit to both the Govt and the RBI).

Don't also forget the aggressive change in stance on how to deal with issues coming from across the border.

Again, there's always going to be a million other things that can be done better. But you have to admit this government is doing a much better job than a lot of previous ones

[1] https://www.quora.com/How-will-the-UPI-interface-of-NPCI-cha...

> However, on the economic front, India is really moving in the right direction - Focusing on Startups and business friendly policy changes, making brand India attractive to the world (FDI),

The red tapes that should not have exist in first place but yes step in right direction.

> passing the GST (massive task and looking to be implemented pretty quickly come April),

Its reduction in tax burden (allegedly).

> introduction of UPI [1] (this will definitely move the country forward to a more cashless economy), integration of all the digital services (Aadhaar, Digital Locker, etc),

More surveillance ? That will only be used for good, right ?

> black money declaration schemes and prosecutions (The situation on the ground is actually changing, people are much more scared of hoarding black money now)

Depends on who is hoarding. If its your local shop, government has no right to interfere unless what they get from the government is more than what they pay in taxes.

You misunderstand my previous comment. I am saying government is like a mob that extort money in return for not f__king your shit up (and that is puttign it lightly). And Indian Governments (from 1950-today) are the biggest the world has ever seen, actively exploiting billion people.

I dont think government has inherent right/duty to tax its people or to assume the duty of developing infrastructure etc. In my opinion government has only two task 1. Defend its people. 2. Maximizing profit for its natural resources. Everything else should be left at competing private companies.

> Why didn't people want to pay taxes? Because they got nothing in return.

No, they didn't pay taxes because there was no repercussions in evading them. Humans work as Nash equilibirium, and anyone would skip taxes if they could.

Let me be more direct. Do you think

  For small business & middle class,
  
  the government-provided benefits in terms of money[1] - the tax paid > 0 ?

[1] Dont believe/spread the lie that what government provides are invaluable.

After 60 odd years of corrupt rule by various Governments anyone would be cynical. So no there is nothing wrong with being cynical.

However, India has formally asked Britain, through an official letter, to extradite 60 fugitives (including Mallya/Lalit Modi) during the bilateral talk held between Mr. Modi and Mrs. May yesterday: http://www.financialexpress.com/india-news/narendra-modi-the...

A formal extradition request wasn't even sent (for the 60 fugitives) during the UPA rule. So I definitely feel that things are now changing for the better.

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