Combine this with the recent roll out of GST, we are on a very progressive path and with good momentum.
Finally, there are a lot of disadvantages for being on a completely centralized digital payment platform from an individual liberty point of view. Imagine that a significant portion of your net worth is just a number stored in a "secure database" which falls under the jurisdiction of some government. Now image that you vocally disagree with the government's policies enough for the government to start taking notice. It becomes very very easy for the government to shut you up - all they have to do is strongarm the bank to freeze that number. Its not as hypothetical as it sounds as the Indian government has done this before.
A large portion of black money was deemed to be held up by the bureaucracy - bribes paid by private individuals and corporations to government employees and politicians. Had demonetization been done along with a hiring freeze (and subsequent trimming down) of the bureaucracy, I'd have been more certain that the motives behind demonetization were to root out corruption. However, the bureaucracy is now larger and more powerful than ever under this government. Thus, the incentives to seek bribes still exits because of this power imbalance between the powerful bureaucrats and relatively week individuals.
Consider the cost to build and maintain a road network vs. the benefits it brings.
PS: Further, it's not a question of collecting more money from everyone it's a question of collecting the same money from everyone which is a benefit even if you end up burning the extra money.
But aren't you just saying that when you have $1 Billion then paying $500k more to a contractor doesn't seem that bad based on the net benefit it would bring to have a dream home.
But imagine if this was a charity (something which govt is, if we look at it a certain way), that inefficiency means more people could have benefited out of it.
India is a case in point, they have enough infrastructure to allow for rapid growth even with a highly corrupt government. While they could do a better job, the increasing standard of living allows for ever improving government services even without increasing efficiency. Further, as standers keep rising the pressure and ability to reduce corruption increases both because governments can directly pay more and because better options show up outside of government.
PS: In the US and I suspect most other countries you can reduce your tax burden by donating just fine. So, taxes are effectively a non issue in terms of charitable donations. Thus tax evasion is simply money people are keeping for personal use.
Can be said of 99% governments in the world.
Look at it this way. I have $100. I can either spend all of that $100 on stuff that makes me happy, or I can give half of it to the government which will spend most of it on stuff like schools that my kids won't go to, roads I won't drive on, charity (welfare) for people I don't even know. They're wasting all of my money on stuff that doesn't directly make me happy!
No matter how well a government is run, there will always be people who complain about it, and not without cause.
Of course the alternative (extreme libertarianism) ends up being worse in pretty much every way, but in that case it is the world that is shitty, not some big government.
Umm... no. The red tape is now minimal at the Central government level. Digital, removal of archaic laws, clearly defined parameters for bids, etc.
Depending on who you ask, Governments will always be undeserving of your tax money. Also, I'd rather prefer my tax money be spent on farm loan waivers than be stashed away hidden from the Government under a carpet or in a foreign bank, if that's the comparison you want.
> Finally, there are a lot of disadvantages for being on a completely centralized digital payment platform from an individual liberty point of view. Imagine that a significant portion of your net worth is just a number stored in a "secure database" which falls under the jurisdiction of some government. Now image that you vocally disagree with the government's policies enough for the government to start taking notice. It becomes very very easy for the government to shut you up - all they have to do is strongarm the bank to freeze that number. Its not as hypothetical as it sounds as the Indian government has done this before.
Are you suggesting that you should keep significant amounts of your money hidden from the Government because you think they might unduly target you because of your wealth and views? Isn't that how black money is defined in the first place - keeping it hidden from the Government? That is a civil liberties issue, the solution for which cannot be to keep your money hidden from the Government.
> A large portion of black money was deemed to be held up by the bureaucracy - bribes paid by private individuals and corporations to government employees and politicians. Had demonetization been done along with a hiring freeze (and subsequent trimming down) of the bureaucracy, I'd have been more certain that the motives behind demonetization were to root out corruption. However, the bureaucracy is now larger and more powerful than ever under this government. Thus, the incentives to seek bribes still exits because of this power imbalance between the powerful bureaucrats and relatively week individuals.
I don't see the connection between a hiring freeze in bureaucracy and demonetization. Bureaucrats are a fraction of the population of the country and tackling corruption in bureaucracy is something that must be done regardless.
Those aren't the only two alternatives. How about you lower the tax rate and create incentives so that the farmers actually pay back the loans. Right now, farmers take loans with the assumption that they'll be waived, and the cycle continues. I'm not shooting on the farmers here, I'm just saying that farmers, like bureaucrats, like businessmen, are human. If they're incentivized to game a system, they will. For once it'd be great if my tax money could be better spent on other things that would actually benefit the country (strong defense, capable law and order through an effective police and judiciary, etc.) rather than indirectly buying votes for the current political party in power (farm loan waivers etc.). Hell given the binary option of farm loan waivers vs stashing my cash abroad, most businesses will still stash it in real estate, abroad, etc.
> Are you suggesting that you should keep significant amounts of your money hidden from the Government because you think they might unduly target you because of your wealth and views?
No. Even after tax legitimate money is at risk if its just a number stored in a "secure" database somewhere. Whoever has ultimate control over that database has power over you. With cash, gold, you can carry them with you and anonymously pay for goods/services without compromising on your privacy. I was merely pointing out one limitation with a completely central digital payment platform.
> I don't see the connection between a hiring freeze in bureaucracy and demonetization
Ok who is on the receiving end of bribes? The bureaucrats/politicians. Demonetization was supposed to hit the tax evaders (usually bribe givers) and the bureaucrats (bribe takers). Maybe they both were seemingly hurt with demonetization as they both had cash stashed. But since the bureaucracy still exists (and has become more powerful eg - http://www.thehindu.com/news/national/the-taxman-now-has-mor...), there is no incentive for the bribe takers to stop taking bribes. Tell me this new bill won't be abused and misused. Looking at the history of laws being abused in India, I'd bet that it will be
Those roadside merchants will never pay tax as they don't make enough.
Internet connectivity/density is a joke in this country.
Everyone is using cash again and you have to still pay bribes.
Its time we tell the Emperor; The Emperor has no clothes!
The evidence is that it had a strong negative effect. Also, anecdotally, the roadside merchants who used to accept PayTM for the duration while currency supply was squeezed, have now gone back to cash[1]
However PayTM's CEO is now buying a house in the poshest part of New Delhi, so I'm sure it wasn't all bad for him.
[1] http://www.pymnts.com/cash/2017/cash-usage-india-post-demone... ... "March data from RBI poured cold water on proponents of digital payment. The volume of overall digital transactions, which had increased by 42 percent from 672 million in November to 958 million in December 2016, declined by 20 percent to 763 million in February 2017."
Every study out there suggests that demonetisation was a big blunder, causing a very severe blow to the Indian economy, including the death of 150+ civilians.
The real motive for demonetisation was to legitimize the black money of the ruling party BJP and eliminate black money of opposition parties.
Overall it has permanently destroyed trust in governments actions. Most big money people money I know today trust only two things to park their money: Gold and Real estate. Worsening the home affordability problem.
>>Many of the roadside merchants who used to be exclusively cash only, have started accepting dizital payments.
Their business was destroyed so badly that they had to use digital wallets just to fill their stomachs.
>>All those on-record transactions are now part of formal banking system, instead of earlier don't-bother-about-tax approach.
They were temporarily. They are back to being normal again.
>>Combine this with the recent roll out of GST, we are on a very progressive path and with good momentum.
Some people even say the current government doesn't even have a clue what it is doing, and it will take somebody prudent next time to fix the mess created currently.
Can you provide a source on this ?