BLACK MONEY- THE STUMBLING BLOCK IN INDIA
We often come across the two terms in our daily lives that are Black Money and the White Money. The title itself suggests that Black Money is the stumbling block or an obstacle prevailing in our culture. For instance, someone has bought a house but the wondering thing is that from where that particular person has managed to buy that lavish and costly house when he is financially not so sound and is a thief? It must be the black money earned through illegitimate means or he must have committed theft somewhere. So these are some of the assumptions that people may make. On another hand, if some rich person buys the same house, we presume that he has white money and can afford such a lavish house.
It should be noted that this problem of Black Money is prevalent in the economy for ages. Corruption is prevalent at every level and people are destroying themselves and harming the integrity of the nation as well.
Ironically, despite of so many legislations to curb the problem of Black money and despite the presence of so many authorities to deal with the black money, this problem has never vanished. Don’t you think that this is only possible because the authorities are corrupted? Let’s take an example of Police authorities which is one of the said controlling authorities. When they are bribed they provide full support for the commission of illegal activity. We are witnessing a number of custodial deaths. Why? Police themselves are indulged in such types of illegal activities may be due to money greed or police sub-culture or professional incompetency or some other reason. There is not just one issue, in fact, there is no end to such type of issues.
Even the demonetization was one of the landmark steps taken by the government to curb the existence of black money. But I understand that after some time, this measure became fruitless. People started doing illegal activities again and this is because of the existing corruption among the relevant authorities.
So this article is the means of making readers familiar with this noticing problem of Black Money and to look on various aspects of it as to how this black money is caused or what are its sources? How it is affecting the nationalism? What are the measures taken by the government which unfortunately failed?
WHAT IS BLACK MONEY?
The term black money can be defined as the money earned from illegitimate and unlawful means. It remains unforthcoming and secretive before the government authorities so that it is saved from becoming taxable. Alas! The black money is not subject to taxes as it is generated from the commission of spurious activities such as smuggling, money laundering, crime, and corruption and these activities are performed by felonious means.
Black money is nowhere counts in the GDP of the country and even counterfeit notes come under black money. India according to Global Financial Integrity Report ranks 8th in the generation of black money. Recently, Enforcement Directorate filed a case of Money Laundering against Rhea Chakraborthy stating that 15 crore rupees were debited from Sushant Singh Rajput’s account. Now the money laundering took place here by which black money can be converted into white money. Just because they cannot spend the black money publicly, they try to mask their accumulated black money or they separate the money from its source and mix it up with white money.
Have you heard about Round tripping? This is something where a person sends his/her money to a tax haven for exemption from tax and invests that money in India in form of Foreign Investment. Are not there proper regulations to distinguish between black and white money? Is the government blind or don’t want to look in the totality of the money received as a foreign investment? Is there no procedure to look and to inspect into the source of received money to identify its nature?
WHY IT IS DIFFICULT TO ASSESS THE BLACK MONEY?
The answer to this question is again revolving around the level of corruption existing in the country. Let assume that you have bought land of which you paid 70% through cheque and 30% by cash. Now if you don’t report this 30% to Income Tax Department, how the government would get to know about it? The money hidden from the government is considered black money and due to which it results into big losses in the form of taxes which is one of the major revenue sources for the government. How can the government measure the black money when the commission of unlawful activity is hidden? Don’t you think this black money and unaccountability to government is degrading the value of nationalism? Doesn’t it demean and lower the patriotic sentiments of the country? Doesn’t it lower the loyalty to our nation?
SOURCES & CAUSES OF BLACK MONEY-
Due to the existing corruption, tax evasion, tax avoidance, crimes, money laundering, round-tripping, complex procedures, and other causes, black money has not been curbed yet and is a matter of concern and distress. The sources from where black money generates-
- Sellers who don’t issue bills for the goods or services they deliver generate black money as this income does not hold accountability and is nowhere recorded.
- People often invest their black money into buying jewelry or by way of the round-tripping show it as foreign investment.
- People often undervalue their assets to refrain from paying taxes
- Nonprofit organizations conceal their actual funds or the exact amount of donations received thereby running away from paying of rightful taxes.
- Hawala Transactions is one of the means to hide black money where the transaction takes place without the use of banks
GOVERNMENT INITIATIVES-
By the reason that black money is affecting the financial structure of the country and that it creates the underground parallel economy, the government took various measures to bring an end to such practice. Black money encourages the commission of unlawful activities such as terrorism, drugs, which is quite harmful and detrimental to the economic prosperity of the country.
Government brought tax reforms in the tax system to reduce the generation of black money. The TDS (Tax Deducted at Source) has been incorporated which I understand to be an effective measure to some extent but is not fully efficacious.
Black Money Bill has been introduced thereby reporting the generation of black money within a certain time.
Demonetization was a landmark move but despite this policy, people to a larger extent are not satisfied with the results. A small percentage of people considered it a beneficial move as it increased direct tax collection.
The government initiative to promote DIGITAL INDIA and cashless transactions is an effective measure but still, the majority of people perform cash transactions. Why? I understand that this is due to the low literacy rate. People are not able to understand the real benefits of digital transactions because they are illiterate and unknown to their advantages such as time-saving transactions or no distance barrier.
In addition to the above measures, there are certain authorities and legislations which were brought into the picture to eradicate such type of practice in the economy. Despite authorities such as police, Enforcement Directorate, CBI, Central Board of Exercise and Customs, and others and enacted legislations such as the Prevention of Corruption Act, 1988, Benami Transactions Prohibition Act, 1988, Prevention of Money Laundering Act, 2002, The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, Lokpal and Lokayukta Act and others, black money has not evaporated from the system why?
SUGGESTED SOLUTIONS-
- Mere enactment of legislations and authorizing people to eradicate this practice is not adequate. Rather it should be accompanied by accountability at each level.
- The government should mandate the reporting of PAN card for the transactions involving high amounts such as above 2 or 2.5 lakhs
- Rules should be made to figure out the non-filers of income tax return (ITR). Those who exempt from filing the ITR despite undertaking high financial transactions should be identified with the help of the third party.
- Proper governance rules should be established to avoid the illegal trafficking of drugs.
- Strict and stringent rules as to prosecute the guilty should be made so that respect and accountability for taxpaying in the minds of people prevails.
- The government should reform the licensing control and make the system fully rationalized
- Ensuring transparency by removing unnecessary, unneeded and redundant control in the required segments
GURNEET KAUR
BBA LLB (H)
ICFAI UNIVERSITY, DEHRADUN
Disclaimer: This article is the personal opinion of the author. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any Indian Government or any other Government of the world.
Perfectly said.
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