Amnesty Capital - An idea worth thought (Extract from my book 'Transformers' ISBN 1514861240)

Ideally, citizens should pay taxes and the nation should be free of corruption. In reality there are huge sums of unaccounted money in culturally stagnating nations. Governments of respective nations have every now and then launched pardoning schemes, which are under-availed for various reasons. This is how I propose to attract this capital into the real economy.

‘Amnesty Capital’ is an innovative way for Governments to re-route black money into real economy, while ensuring that a specific sector which otherwise is not addressed adequately owing to it being capital-intensive, high-risk technology sector gets a boost. Governments are usually incapable of investing in high-risk technology projects for multiple reasons. Therefore, Governments could specify, assess & approve projects, say, in the capital-intensive and high-risk areas of material science. Amnesty capital could be treated as either Unsecured Royalty Capital (read ‘royalty capital’) or a Bearer Bond or Bearer Debenture or Bearer-Quasi-Equity, existing in form of a paper instrument with a three to five year lock-in period. Public, then is allowed to buy these bearer financial instruments of any of the approved Companies, anonymously; from any dealing bank without identifying themselves at all. The Companies that access this capital shall be obliged to pay a small balloon return on the Amnesty Capital accessed by the issuer to the holder, along with the principle, on submission of bearer instrument. The Company will also be obliged to provide the Government a return, which enables the Government to recover the taxes it would have otherwise never received on the said amount. All the monies from which the Govt. has recovered its minimum tax through 5-years’ bonds are provided a Government approval as tax-paid monies. The redemption amounts of the financial instruments will be transferred into any account specified by the bearers, when they go to redeem and monetize them, thereby maintaining the anonymity of the bearer.

This provides taxes to the Government; converts black into white taxable income, pushes the high-risk capital-intensive technology industry and still ensures the anonymity of the investor.

The condition is - do this only for those sectors (like material science, semiconductors etc.) which otherwise cannot access capital in India. The scheme could be used in other countries, which face the reality of humungous unaccounted money in private hands, while certain sectors of economy being neglected.