Niti Aayog Vice Chairman Arvind Panagariya says that he would suggest eliminating customs duty on gold to curb smuggling and thereby reduce its potential as a vehicle for parking black money.The current customs duty on gold is excessive and this leads to a "huge amount" of smuggling, he said here on Monday while delivering a lecture on India's economic policy and performance."If the gold is going to enter the country illegally, the purchases will also be done illegally," Panagariya said. This turns gold into an asset in which people keep their black money, he added.Therefore, he said that he advocates reducing or eliminating the customs duty on the metal are possible ways of ending gold smuggling."A lot of the black money is in real estate and one of the things that can be done to stop it is to reduce the stamp duties on land transactions that have gone into double digits in some states," Panagariya said while answering students' question at the lecture organised by the Deepak and Neera Raj Centre on Indian Economic Policies at Columbia University's School of International and Public Affairs.
He quoted Scottish economist Adam Smith's maxim that an "unjust" rate of taxation is a temptation to evade it and said that where the stamp duties are overly high, they should be rationalised to discourage black money deals.The vice chairman also said that a reason for the proliferation of enforcement of laws was lax. "If enforcement is not as good as it is in the United States, people get tempted that if they evade they (can) get away."Panagariya disputed claims that only six percent of the money that was exchanged after the demonetisation was black money."I don't think six per cent could have generated so much of transactions that went on in the major cities of India where the old currency was being traded on massive scale at substantial discount," he said, adding "So I will think that a much larger part of the currency was black money."He asked, "If it was white money, what was the need for the all the massive transactions that happened where old currency was exchanged at a discount.?"