TIOL-DDT 2979 · the untouched capture
Rendered as it looked. Links and images are disabled in this view; the file itself is untouched.
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"
"http://www.w3.org/TR/html4/loose.dtd">
<html>
<head>
<title>Untitled Document</title>
<meta http-equiv="Content-Type" content="text/html; charset=iso-8859-1">
</head>
<body>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=26988"><img src="http://www.taxindiaonline.com/RC2/image/stories/limca_book2016.jpg" alt="DDT in Limca Book of Records - Third Time in a row" width="252" height="220" hspace="5" border="0" align="right" ></a></font><font color="#663399" size="3">TIOL-DDT 2979</font><br>
28 11 2016<br>
Monday</strong></font></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600">GST - new Model Laws released by Central Government</font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> Central Government has finally released the:</font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>1. <a href="http://www.taxindiaonline.com/RC2/pdfdocs/draft-model-gst-law-25-11-2016.pdf" target="_blank">Revised Model GST Law</a></strong></font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. <a href="http://www.taxindiaonline.com/RC2/pdfdocs/draft-igst-law-25-11-2016.pdf" target="_blank">Draft IGST Law</a></font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>3.</strong> <a href="http://www.taxindiaonline.com/RC2/pdfdocs/draft-gst-compensation-law.pdf" target="_blank"><strong>Draft GST (Compensation to the States for Loss of Revenue) Bill, 2016</strong></a></font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In Delhi, the government offices leak like a sieve and unconfirmed versions of the Model GST Law (with review markings) found their way into the social media. One Pravin Dhandharia tweeted on 23rd November - <em>GST amendment copy is in circulation dated nov 2016, is it official, pl let us know </em>- to which Revenue Secretary Hasmukh Adhia tweeted on 24th November - We have not officially shared the revised draft of Model GST Law so far. So please do not go by this. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On November 26th, the Revenue Secretary tweeted, <em>Revised Draft Model GST Law, Draft IGST Law, Draft GST Compensation Law are uploaded on our website now; These Laws will be considered by GST Council in its meeting scheduled for 2nd and 3rd Dec and finalised. </em></font></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f1"></a>GST Draft Laws - Casual and Irresponsible Law Making - Sub-section 0? </font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>I </strong>get mad when my junior colleagues in TIOL make simple avoidable mistakes while we upload the tons of law churned out by various authorities. But I feel guilty that when the highly intellectual overpaid pampered babus can make silly mistakes, I am expecting the moon and more from my simple boys and girls. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Look at this Section 47 in the Draft GST Law:</font></p>
<table width="90%" border="1" align="center" cellpadding="3" cellspacing="0">
<tr>
<td bgcolor="#F3DBCF"><p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>47. Transfer of input tax credit </strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On utilization of input tax credit availed under the CGST Act for payment of tax dues under the IGST Act as per sub-section <font color="#FF0000"><strong>Error! Reference source not found.</strong></font> of section 44, the amount collected as CGST shall stand reduced by an amount equal to the credit so utilized and the Central Government shall transfer an amount equal to the amount so reduced from the CGST account to the IGST account in the manner and time as may be prescribed. </font></p>
<p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>CGST Act</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">On utilization of input tax credit availed under the SGST Act for payment of tax dues under the IGST Act as per sub-section <font color="#FF0000"><strong>Error! Reference source not found.</strong></font> of section 44, the amount collected as SGST shall stand reduced by an amount equal to the credit so utilized and shall be apportioned to the Central Government and the State Government shall transfer an amount equal to the amount so apportioned to the IGST account in the manner and time as may be prescribed. </font></p>
<p align="right"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>SGST Act</strong></font></p></td>
</tr>
</table>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Similar bloomers are also seen at - </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">143. (in contents) Test purchase of goods and/or services...................................... <strong>Error! Bookmark not defined.</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>7. [Powers of SGST/CGST officers under the Act (Draft I)</strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(2) Where any proper officer issues an order or acts under any one or more sections................ of this Act, he shall also issue an order or take action, as he may deem fit, under the corresponding section of the {SGST/CGST} Act as being the proper officer under sub-section <strong>Error! Reference source not found.</strong> of the SGST/CGST Act as a part of his order or action under this Act, under intimation to the jurisdictional SGST/CGST officer. </font></p>
<p align="justify"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">85. Offences and penalties</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(vi) fails to collect tax in terms of sub-section <strong>Error! Reference source not found.</strong> of section 56, or collects an amount which is less than the amount required to be collected under the said sub-section, or where he fails to pay to the credit of the appropriate Government under sub- section </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif" style="background-color:#FFFF00" span="span">0 </font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">thereof, the amount collected as tax; </font></p>
<p align="left"><font size="2" face="Georgia, Times New Roman, Times, serif"><font color="#FF0000" face="Verdana, Arial, Helvetica, sans-serif">And what is sub-section 0?</font></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This is a Micro Soft Word error message when a book marked reference is deleted. The point is - it is boring to read the same draft again and again and then these mistakes creep in - fortunately nobody is bothered and you have a licence to make as many mistakes as you want - you always have an option of correcting them anytime you want. I only hope that somebody does the proofreading before the Bills are sent to Parliament and the State Legislatures. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Actually the Model GST Law is a combination of two laws - the Central GST Act and the State GST Act. They could have at least made two copies and separate Bills for the Centre and States. Anyway, this model cannot go to the legislatures; they could have made the copies that go to the legislature. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The very first sentence of the Model Law reads as: </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This Act may be called the Central / State Goods and Services Tax Act, 2016. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The second sentence is - It extends to the whole of India / State's name. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">And some of the provisions are exclusively for CGST and some for SGST. </font></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f2"></a>'Goods' and 'Services' find new definitions in new Model Laws released by Central Government</font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>AS </strong> per Section 2(48) of the Model GST Law released in June 2016, </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(48) "goods'' means every kind of movable property other than <font color="#FF0000">actionable claim</font> and money <font color="#FF0000">but includes securities</font>, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply; </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explanation.- For the purpose of this clause, the term 'moveable property' shall not include any intangible property. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The definition as per Section 2(49) of the Model GST Law released now reads as, </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">"goods'' means every kind of movable property other than money <font color="#FF0000">and securities</font> but includes <font color="#FF0000">actionable claim</font>, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This means: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. Goods included 'securities' in the earlier model law, but is now specifically excluded. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. 'Actionable claim' was not goods earlier, but is now included in the definition of goods. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. The explanation, <font color="#FF0000"><em>the term 'moveable property' shall not include any intangible property </em></font>is not there now. </font></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per Section 2(88) of the earlier Model Law, </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(88) "services'' means anything other than goods; </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explanation: Services include intangible property and actionable claim but does not include money. </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The new definition in Section 2(92)reads as: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>"services'' means anything other than goods; </em></font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explanation 1.- Services include transactions in money but does not include money and securities; </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Explanation 2.- Services does not include transaction in money other than an activity relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. </font></em></p>
</blockquote>
<p align="justify"><font color="#FF0000" size="2" face="Verdana, Arial, Helvetica, sans-serif">New Capital Goods</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif">: The previous model law had a strange definition for capital goods. Section 2(20) defined it as: </font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(20) "capital goods" means: - </em></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(A) the following goods, namely:- </em></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(i) all goods falling within Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the Schedule to this Act;</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> (ii) pollution control equipment;</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> (iii) components, spares and accessories of the goods specified at (i) and (ii);</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> (iv) moulds and dies, jigs and fixtures;</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> (v) refractories and refractory materials;</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> (vi) tubes and pipes and fittings thereof;</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> (vii) storage tank; and </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis but including dumpers and tippers used- (1) at the place of business for supply of goods; or (2) outside the place of business for generation of electricity for captive use at the place of business; or (3) for supply of services, </em></font></p>
</blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(B) motor vehicle designed for transportation of goods including their chassis registered in the name of the supplier of service, when used for - </font></em></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) supplying the service of renting of such motor vehicle; or</font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> (ii) transportation of inputs and capital goods used for supply of service; or </font></em></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(iii) supply of courier agency service; </font></em></p>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(C) motor vehicle designed to carry passengers including their chassis, registered in the name of the supplier of service, when used for supplying the service of- </em></font></p>
<blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em>(i) transportation of passengers; or</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> (ii) renting of such motor vehicle; or</em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><em> (iii) imparting motor driving skills; </em></font></p>
</blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(D) Components, spares and accessories of motor vehicles which are capital goods for the taxable person. </font></em></p>
</blockquote>
</blockquote>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Now there is a less complicated and more relevant definition. Section 2(19) reads as: </font></p>
<blockquote>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(19) "capital goods" means goods, the value of which is capitalised in the books of accounts of the person claiming the credit and which are used or intended to be used in the course or furtherance of business; </font></em></p>
</blockquote>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f3"></a>GST CESS - Credit to be Allowed </font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THERE </strong> was an opinion circulating that there will be no input credit of GST Cess and that the Cess will be levied at only the first stage, but the draft GST <strong><a href="http://www.taxindiaonline.com/RC2/pdfdocs/draft-gst-compensation-law.pdf" target="_blank">(Compensation to the States for Loss of Revenue) Bill, 2016</a></strong> has clarified this position <em>that the input tax credit in respect of GST Compensation Cess on supply of goods and services leviable, shall be utilised only towards payment of GST Compensation Cess on supply of goods and services. </em></font></p>
<p align="center"><font color="#006600" size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><a name="f4"></a>GST Cess to be in a Compensation Fund </strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> proceeds of the GST Compensation Cess leviable shall be credited to a non-lapsable fund known as the GST Compensation Fund in the Public Account, and shall be utilized for purpose of providing compensation to the States for loss of revenue arising on account of implementation of the goods and services tax for a period of five years, w.e.f. the date from which the CGST Act is brought into force. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">All amounts payable to the States shall be paid from the Goods and Tax Compensation Fund. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Fifty percent of the amount remaining unutilized in the GST Compensation Fund at the end of the transition period shall be transferred to the Consolidated Fund of India, and shall be distributed between the Centre and the States and amongst the States as per provisions of clause(2) of article 270 of the Constitution; and the balance fifty percent shall be distributed amongst the States in the ratio of their total revenues from SGST in the last year of the transition period. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/pdfdocs/draft-gst-compensation-law.pdf" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Draft GST (Compensation to the States for Loss of Revenue) Bill, 2016</font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f5"></a>GST - Inspector Raj on the Way</font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong>new Model Law, in Section 163 provides for constituting an Authority to examine whether input tax credits availed by any registered taxable person or the reduction in the price on account of any reduction in the tax rate have actually resulted in a commensurate reduction in the price of the said goods and/or services supplied by him. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">After all, the officers should have some productive work! </font></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f6"></a>Reduce Corporate Tax and Withdraw All Incentives - CII </font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> CII President in a meeting with the Finance minister suggested: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Corporate tax be brought down to 18% including all surcharges and cess. In return we can remove all tax incentives, concession and need no grand fathering of previous incentives. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Our calculations of PBT and tax foregone in 2014-15 indicate an effective rate of 19.8% without any tax incentives/ concessions. We believe that in the past when corporate tax has been lowered, corporate tax collection has gone up. An 18% corporate tax should therefore not lead to revenue loss to the Government and at a stroke move us away from a high tax, high concession regime. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This will bring India in line with the most attractive international investment destinations such as Singapore, Sri Lanka, UK and Turkey. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">It will send a powerful message to Indian industry and global investors that India is an attractive investment destination and a huge enabler for Make in India. </font></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><font color="#006600"><a name="f7"></a>Customs - Government Rescinds 'Publication of Daily Lists of Imports and Exports Rules'</font></strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE </strong> Government has rescinded the <em>Publication of Daily Lists of Imports and Exports Rules'. </em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Daily List of Exports Imports is published by Indian Customs as a Trade Facilitation Measure since 1951. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><br>
It started with Bombay, Madras and Calcutta ports and later few more ports were added. As the Name suggests, Daily List was published on a Daily Basis, and a member of trade can subscribe to it on payment of a nominal subscription charge. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">This List is used extensively by Indian and Overseas Exporters Importers, Trade Journals, Market Research companies, Trade Bodies, Chambers to network with each other and to keep track of market and plan the future course of action.</font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjA4MTI=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 140/2016-Customs (N.T.)., Dated: November 25, 2016</font></strong></a></p>
<p align="center"><strong><font size="3" face="Georgia, Times New Roman, Times, serif"><em><font color="#006600"><a name="f8"></a>Anti Dumping Duty on 'Low Ash Metallurgical Coke'</font></em></font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>GOVERNMENT</STRONG> has imposed anti dumping duty on <em>"Low Ash Metallurgical Coke"</em> originating in, or exported from, Australia and People's Republic of China, for a period of five years. </font></p>
<p align="justify"><a href="http://www.taxindiaonline.com/RC2/notDesc.php?MpoQSrPnM=MjA4MTE=" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 53/2016-Customs (ADD)., Dated: November 25, 2016</font></strong></a></p>
<p align="center"><font size="3" face="Georgia, Times New Roman, Times, serif"><strong><em><font color="#006600"><a name="f9"></a>How to Make Mob Miserable - Cash Connection? </font></em></strong></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>IN </strong>1976, the American Economist, James S. Henry wrote: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Who are the users of big cash?</strong> The logical suspects-people who need a highly liquid, anonymous form of wealth, something one could slip into an unmarked envelope, or stuff easily inside an ordinary suitcase. They include tax evaders, drug traffickers, illegal gamblers, loan sharks, fencers of stolen goods, and corrupt politicians, among others. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">There are only two kinds of activity in the U. S. which depend almost exclusively upon large, untraceable, non-credit transactions. The first is profit-motivated crime: illegal gambling, drugs, prostitution, loan sharking, protection, the fencing of stolen merchandise, etc. The second is tax evasion by people who arrange to receive cash income and don't report it. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>A surprise currency recall</strong>: On any given Sunday, the Federal Reserve would announce that existing <em>"big bills"</em>-$50s and $100s - would no longer be accepted as legal tender, and would have to be exchanged at banks for new bills within a short period of time. When the tax cheats, Mafiosi, and other pillars of the criminal community rushed to their banks to exchange their precious notes, the IRS would be there to ask those with the most peculiar bundles some embarrassing questions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Imagine the panic that would strike our criminal community if, all at once, it had to liquidate its enormous hoards of big bills, or else explain where they came from. Any single criminal, acting alone, might be able to dispose of his cash without much trouble. But when all criminals tried to convert their cash at once, they would bump into each other at every turn, competing for the scarce alternatives to cash, trying to unload their bills through innocent-looking outlets, and generally calling attention to themselves. The recalls could be repeated, at random, every few years or so, raising the <em>"transaction costs"</em> of doing illegal business-or else most big bills could be taken out of circulation completely. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The immediate effect of this scheme would be to strike a sharp blow at tax evaders, dope dealers, racketeers, purveyors of vice, and corrupt officials. These denizens of the criminal deep would have to surface with the large cash balances which they carry on hand, and the tax authorities could begin to ask questions. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Naturally, many criminals would search hard for ways to escape these consequences. Unless the reform was carefully implemented they might, for example, convert large bundles by selling them piecemeal at a discount. (Participating in such discounting might be made a criminal offense. In any case this discounting would have an equalizing effect on the income distribution.) Or they might run from bank to bank, cashing in small amounts at each one. (Old bills might be redeemable only at a bank in the city where one is register to vote, with cross-checking between banks in each city.) </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">In general, these escape routes would not be difficult to check, assuming that the reform were introduced with the appropriate degree of surprise and cunning. In the longer run, cutting down on large denominations in circulation would increase the transaction costs of illegal activity (by, for example, reducing the amount of money that can be contained in any given suitcase). The liquidity crisis which would ensue for tax evaders and other criminals might to some extent be averted by the substitution of other currencies, or other exchange mediums such as precious metals. But these are much less convenient, especially for consumer-oriented criminal enterprise. In any case the substitution would be expensive and time-consuming. </font></p>
<p align="center"><font color="#006600" size="3" face="Georgia, Times New Roman, Times, serif"><em><strong><a name="f10"></a>Cash in Coffee Can</strong></em></font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>HENRY </strong>recounted a story: </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Tax investigators recently closed in on a Dallas area dentist who stashed $20,000 of unreported income in a coffee can. He arrived home one day to discover his wife had thrown the can into the trash. After finding that neighbourhood trash had already been collected, he hired a bulldozer for $5,000 and carefully sifted the city dump. By the time the frantic dentist finally located the coffee can, the whole town as well as interested government agents knew about its contents.</font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>Have a nice day.</strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to <strong><a href="mailto:vijaywrite@tiol.in" target="_blank">vijaywrite@tiol.in</a></strong></font></p>
</body>
</html>