RBI Governor Raghuram Rajan favours punishing black money holders

PANAJI: Reserve Bank Governor Raghuram Rajan today favoured punishing black money holders by streamlining laws that should be enforced better.

Terming the black money issue as "sensitive" he said what is important is ensuring that conditions are such that people don't misuse the rules and regulations and don't have the incentive to park money outside.

"We also have to ensure that if somebody is hiding, why only outside, even internally there is a lot more black money, we punish him and enforce the regulations, and laws. For this we need to streamline laws, so that we enforce them better."

"If we have a lot of regulations and don't enforce them, then there is a culture which says these regulations are for fun, a culture where impunity builds up. It is difficult to break that culture, but we have to break it," he said.

Stating that the best way to prevent law breaking is to reduce the incentive to do that, Rajan said, "Do not have 99 percent levels of taxation.

"For the last few decades, we have brought down our levels of taxes so much that nobody has a right to evade those taxes. Those taxes are sensible, reasonable and if they evade it, they are making mockery of the tax system."

His comments assume significance as they come ahead of Budget which will be presented on February 28.

"Let people pay, but if they don't pay, go after them. That message has to get out. People have to know if they evade, they will be penalised. We need to strengthen the tax administration as part of the government," Rajan said.

About the economic reforms, he said "so long as we are able to modulate the pace of liberalisation, people will be with us".

He also underlined the need for economic inclusion that arrives with quality of education, nutrition, healthcare, finance. A job is very important and government has to prepare the people for it by giving the right policies, he added.

Disapproving the inheritance tax, he said focus should on bringing people up rather than bringing down those who are well-off. Also, there will be no incentive for wealth creation if such a tax was introduced, he said.

On the education loans, which have seen a lot of stress of late, Rajan said there is a need for a better student loan scheme to curtail NPAs.