. Black money is a term used in common parlance to refer to money that is not fully legitimate in the hands of the owner and main reason is non-payment of the tax. The money may have been generated through illegitimate activities not permissible under the law, like crime, corruption, drug trade, terrorism, and corruption, all of which are punishable under the legal framework of the state. Further, it may also be generated by legitimate means, but is not declared for the purpose of evasion of tax. Half of India’s economy is black at any given time. Expert estimates agree that the Indian Black Money stashed abroad is close to $ 3 Trillion.
Reasons for its existence are – corruption, illegal activities, political-industry nexus and poll funding, real estate underpricing and investment in it, manipulation of corporate incomes, discouraging rates of taxation etc. Black money has a deleterious impact on society in many ways and at several levels. A part of it remains lying idle, while the other part gets invested in productive and unproductive activities. The government looses on tax front. If it is not invested anywhere, it leads to tightening of monetary supply or squeeze in the volume of money. Generally, black money finds its maximum usage in ostentatious consumption which is inimical to the economic development of a developing economy. At the same time it leads to inflation in the price of real estate. A major chunk of black money is also put to use for criminal purposes which creates problems not only for the economy but also for the law and order. The poor are being deprived of their right to development.
There are several strategies. Joining the global crusade against ‘black money’, creating an appropriate legislative framework to fast track such case and discourage its generation, making administration and economic activities more transparent and maximum use of electronic fund transfers and minimize cash payments, cut the official discretion through e-governance, revise the DTAAs to put a check on tax havens, electoral reforms, tax reforms should be implemented at the earliest etc. There can be other innovative acts like ‘US False Claims Act’ which provide handsome reward for whistleblowers.
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