Friday, August 17, 2012

Black Money

There's uproar in the country about bringing back the black money that's stashed abroad. As usual not surprisingly everyone is missing the point. It is not without reason they say, 'prevention is better than cure.' So why doesn't our economy behave in a way that it's impossible (or at least makes it very hard) to generate black money?

Here are two scenarios where black money is generated and possible solutions.

Land Registration
So there's a guidance value of x Rs/sqft for a specific area. Now this 'x' was probably set a long time back (order of maybe 3-5 years back). Real estate is very volatile and using 'x' as the basis to compute tax is probably not ideal. It's no secret that people quote just about 'x' even if they have paid as much as 3x for a specific property. When I bought a property I quoted it all in 'white' and paid a size able amount for registration and stamp duty and during the same day when I was at the registrar office, I could of course see other apartments in my own complex with exactly the same size being quoted for much lesser and I believe that I got a reasonable rate for my own apartment that I refuse to believe that anyone else buying at the same time paid drastically lesser than me. So black money was generated. How could it have been avoided?

Now is this really a problem that can't be solved with centralized software? There's too much power with the people working at the registrar offices. Move this power from the people into the software and all we really need are clerks who work with the software to help the common man, as R K Laxman would poignantly put it. Can't a software intelligently arrive at a appropriate guideline value based on recent transactions, yearly appreciation, year of the property, area guideline, builder reputation, amenities offered etc? It would be complex, but it's definitely do-able and all it needs is one guy who does "white" transactions to catch all the "black" stuff and automatically impose penalties.

Of course this can be abused.
What if the Govt. gamed the system by creating a really pricey transaction and fed it into their centralized system through the back end? Maybe the MPs have been brushing on their SQL skills!
How do we tackle this now? Hmm maybe we don't need to. This would have simply driven up the guideline value by a exorbitant amount that the property with taxation is now simply unaffordable and hence there are no buyers and in the long run the Govt loses more taxes if there are lesser transactions. If the gaming increased the rates marginally, then the property would be affordable though the number of buyers start dwindling as it goes higher and higher again leading to lesser transactions. Am not a economist, but I believe that gaming the system might prove more detrimental than beneficial.

Movie Theater Tickets
You've seen touts at some point in time selling movie tickets. I saw a recent press release that Ek Tha Tiger's first day tickets were sold at 700Rs for a 100 Rs. ticket. It's become a way of life that it's being reported as a matter of fact. Do you know why touts exist? It's really simple. Think hard. No? Think again. Give up? It's really simple. No?
Have you ever wondered why the ticket counters selling the movie tickets are outside? Ok forget it, now think of the airport - how would one go through immigration? You walk up to a person who checks your papers and then allows you through past that person. All one needs is a similar system for movie theaters and the tout problem is gone, for ever. What we need are "theater toll booths". Have you ever seen touts selling the passes for the toll booths on the highways? Exactly. All we need is to change the design of the God damn building!

These solutions are of course not perfect (nothing on the first try ever is), but I believe the focus really needs to be more on preventing the generation of black money.

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