Black money and its impact on our economy

Posted Date: 27-Jun-2011 Author: Raghav

Category: General Member Level: Gold

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Black money is the money which is unaccounted and is circulated. This is a big menace to the economy of our country. Black money is one of the hot topics discussed now a days in the country. Black money needs to be eliminated and it will generate more revenue for the Government if it is eliminated. This article is about black money and its impact on our economy.

Black money is nothing but the unaccounted money which is under circulation in the country. Black money is the main cause of big loss in the tax-revenue for our Government. We can say that black money is generated by the activities that are kept secret. And this money is not accounted for tax purpose because Government does not know about this money. White money is something which can be shown with relevant accounts and taxes that are paid. Recently Swiss bank has indicated that India has more money than the rest of countries in the world. This is really a shocking news for us. Indian people have deposited huge amount of black money in Swiss bank. The total black money of the people of all other countries is less than the black money deposited by Indians. If black money deposits was an olympic event, India would win a Gold medal. Next comes Russia with more than 4 times lesser than India. USA is not there in the list of top five!. One good news is that Switzerland Government has agree to reveal the names of account holders if the respective Governments formally asked for it. But Indian Government is asking for the details of account holders even though there is lot of pressure from many people across the country. It is time for every one of us to pressurize the Government to reveal the details of account holders of Swiss bank so that corruption is weeded out in our country.

Indian black money in Swiss banks

As per the information provided by Swiss bank, India is on the top of the list of black money deposits in their banks. The total black money deposited by Indians is more than the total black money deposits of other countries. Here is the list of black money deposits by people of various countries.

India -- $1500 billions

Russia -- $470 billions

United KIngdom -- $390 billions

Ukraine -- $100 billions

China -- $96 billions

These are the top 5 countries with black money deposits in Swiss bank. The deposits of other countries are very minimal. We can see that USA is not there in the list of top 5. It is really very embarrassing to see that our country tops in the list of black money holders. This amount is nearly 13 times of the national foreign depts. Every year the black money deposits by Indians is increasing at a rapid pace, but Indian Government is silent on this. Indian Government should appropriate steps to bring back the black money deposited in Swiss banks.

The impact of black money on Indian economy

Black money circulation has severely affected Indian economy in many ways. Let us see what is the impact of black money circulation on Indian economy.

 Precious national resources are not utilized properly.

Black money does not contribute for any productive activities in the country

There is a huge loss to the income tax revenue for the Government. No tax is paid for the
black money. The fixed salaried people are paid income tax and are in lower portion of income-ladder. That is the reason many government officials are involving in corrupt activities like getting bribes and commissions. In general they are not able to catch up with the business men or professionals. Many of the highly paid Government officials and honest employees are earning very much less amount than an average small shop keeper in cities like Mumbai or Delhi. But income tax is paid by these employees where as the shop keeper does not pay the tax even though he earns more than an employee.

It is not possible to make correct analysis of our economic system and formulate right policies
due to circulation of black money. For example it is not posisble to exactly calculate savingincome ratio, or income of various sectors etc. So most of these estimates are only a guess work.

Finally black money has corrupted our political system. We can see most of the MLAs, MPs,
Ministers collecting funds openly for which there is no accountability.

What is to be done now?

We can bring back the black money deposited in Swiss banks back to our country. So much can be done for the development of the country if we bring back the black money and use it for productive activities. If the total black money is brought back, India will be able to clear all the foreign debts within 24 hours. By using this black money Indian Government can maintain the country for another 30 years even if all the taxes are abolished.

There is an indication that around 75 thousand people are travelling to Switzerland every year and some 25 thousands travel very frequently. Now it is the responsibility of our Government to take serious steps and get back the black money deposited in Swiss banks. Since Switzerland has agreed to reveal the names of the account holders now, Indian Government should sincerely work out to find the names of persons who deposited black money in Swiss bank and take necessary steps to bring back the black money. This has become a matter of pride for our country. If the Government still keeps silence on this issue of black money, the whole world will laugh at us. Swiss Government recently passed an act to return the black money to the country of origin. Let us hope that our Government will take serious steps to deal with the black money and try to get back the money from Swiss banks.

Black money ppt Presentation Transcript

Indian black money Black money refers to funds earned on the black market, on which income and other taxes has not been paid. The total amount of black money deposited in foreign banks by Indians is unknown, but one estimate by R Vaidyanathan, a Professor of Finance, estimated the total at over Rs 7,280,000 Crores Black money in Swiss banks While official numbers are not available, Swiss banking officials have said that the largest depositors of illegal

foreign money in Switzerland are Indian In August 2010, the government revised the Double Taxation Avoidance Agreement to provide means for investigations of black money in Swiss banks Black money in swiss banks Rudolf Elmer provides the list of famous Indians to Wikileaks. He also revealed that black money was started depositing in Swiss Banks in early 70s by some of the names of India through illegal mining, stock market, drug dealing, fake projects etc. Monopoly. A monopolist maximizes profit by producing a little less than the market equilibrium, driving up the price of the good. This creates a deadweight loss to society, (some mutually beneficial transactions are forgone), which is why a monopoly is discouraged or illegal in many parts of the world. India not serious aboutunearthing black money inSwiss banks Rudolf Elmer, a rare whistleblower who has brought out much information on secret Swiss banks accounts, has accused the Indian government of not being serious enough in getting details of black money stashed away in Swiss banks. Why People Use Swiss BankAccounts Swiss bank accounts are especially attractive to more illicit operations, and are apparently popular for illegal purposes. Even with law-abiding questions aside, Swiss banks are often portrayed as among the premiere financial institutions on Earth, catering to the wealthiest people and companies that the global fiscal scene has to offer Unlike many media portrayals, the mass usage of Swiss banking by both questionable and legitimate clients alike is actually based in reality; as recently as 2009, the financial sector represented over 11% of Switzerlands Gross Domestic Product (GDP) and employed almost 200,000 people, over 5% of the total Swiss workforce, not to mention employing over 100,000 people abroad. In 2001, Swiss banks managed .6

trillion American dollars. That number has decreased for numerous global market reasons, but is still strongly impressively and impressively strong. The reasons why people useSwiss bank accounts? Secrecy Neutrality Quality Secrecy Neutrality Quality Is India a poor Country IsIndia poor, who says? Ask Swiss banks With personal account deposit bank of $1500 billion in foreign reserve which have been misappropriated, an amount 13 times larger than the countrys foreign debt, one needs to rethink if India is a poor country? Y india is poor? DISHONEST INDUSTRIALISTS, scandalous politicians and corrupt IAS, IRS, IPS officers have deposited in foreign banks in their illegal personal accounts a sum of about $ 1500 billion, which have been misappropriated by them. What if dis money cums back?Yahan mat dekhoYeh mein bolunga How dis means goes into swissbank Can we bring back ourmoney? Itis one of the biggest loots witnessed by mankind the loot of the Aam Aadmi (common man) since 1947, by his brethren occupying public office. It has been orchestrated by politicians, bureaucrats and some businessmen.

Black Money And Its Impact On Indian Financial System

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A country where more than 450 million live below the poverty line earning less than $1.25 per day India surprisingly enough also happens to have a large number of billionaires. In fact Forbes magazine list of billionaires features at least thirty six Indians and it has been found that only United States, Germany and Russia have more billionaires than India. Yet strangely enough the finance ministry and income tax department seems to have no record of these billionaires mansions, cars, shares, money all exempt form taxes. No wonder the gap between rich and poor seems insurmountable in India. Everywhere one looks there is ostentatious display of wealth and money with the rich owning mansions, yachts, jet plane, sports teams and living up the high life while the poor and middle classes gasp under the heavy burden of taxes. Where is this entire money coming from or better still where is it going? The answer is quite simple really the rich and the influential are taking advantage of tax havens to evade the tax net and hoarding money in over seas offshore banks in places like Switzerland, Cayman Islands, Luxemburg, British Virgin Islands and so on. In fact latest data provided by Swiss Banks show that India tops the list for countries with maximum black money stashed away in Swiss banks safe from tax net. Some Facts About Black Money India leads the list with $1500 Billion black money in Swiss banks and is closely followed by Russia and U.K with $470 and $390 billion in black money. Sadly, enough the list of individuals with illegal hoardings in personal accounts include top industrialists, politicians, IPS and IRS officials. The recent case of Hasan Ali, Pune based stud farm owner and dubbed Billion Dollar Bandit brought home to many India the pernicious influence of black money in the Indian economy. The curious case of Hasan Ali, who ventured into hawala in 1990 held more than $8 million in three separate Swiss Bank account and was a close associate of the international arms dealer Adnan Khashoggi known for supplying arms to LTTE, truly is an eye opener in showing how far the rot has become embedded within the Indian economy. The recent 2G scam, corruption related to Commonwealth Games all point towards the growing influence of black money in Indian financial systems. Black Money: The Government Initiative In a bid to bring back the huge amounts of black money that is languishing in foreign banks the Indian government had formulated the Voluntary Disclosure of Income Scheme in 1997 to encourage tax defaulters to disclose unaccounted for income and wealth. The law has so far had only minimum influence and success. As finance minister Pranab Mukhejree explained there is little scope to recover black money to unravel the hidden trail to

perpetrators as there is at this point no legal framework in place to tackle the thorny issue. The finance minister recently also unveiled a five pronged scheme to combat influence of black money. The strategy outlined by the esteem minister includes: Joining the global fight to curtail black money Development of a legal framework Establishing institutions to deal with illicit funds Implementing the plan of action Developing skills of manpower capable of taking action Every honest Indian irrespective of class and social status looks forward to the successful formulation and execution of ant-black money strategy.

1069 Words Essay on Black Money and Its Effects

by Vishal

Black money is unaccounted money, illegally acquired wealth or other assets made through accepting bribery or other morally depraved acts. It is not just cash stashed at hidden places in the house or in benami accounts. It is in various forms like shares, bonds, securities, or other forms of instruments. It may be in the form of real estate-houses, shops, plot or other assets like cars. It may be in the form of gold, silver, diamonds or jewellery. It is believed that there is a huge amount of black money in India, estimated to be 200 million crores. It is also said that in our country over 200 crore rupees of black money is created every year. This reflects the magnitude of black money market in India. This also bears testimony to the amount of corruption prevailing in the country and the illegal activities being carried out. The biggest means of creating black money is avoidance of income tax and sales tax. Most of the businessmen never show the actual income they earn. They either never maintain any books of account or also keep false accounts to be shown to the authorities. As a result, the tax which is due to them is never paid. But the money they make out of their business keeps on accumulating with them. After a period of time when their wealth increases to huge amounts, they cannot show where this money has come from. This is black money. While shopping, most of us never ask for a bill from the shopkeeper or the dealer. We never realise its consequences.

Thousands of crores of rupees in sale tax is avoided because of absence of billing. Many dealers do not deposit the sales tax collected from the customers with the sales tax authorities. This is evasion of sales tax. The government has introduced the system of Value Added Tax (VAT) whereby the sellers of goods are taxed for the value added. But even here, the actual sale shown by the dealers is much less than what actually is. It is believed that in export dealings the billing is inflated by an average of 20 per cent. This amount goes into the pocket of the dealer without payment of any tax this amount taken together runs into hundreds of crores of rupees every year. This is nothing but black money. The other means through which large amount of black money is created is through illegal trades. All income that is received because of smuggling of gold, brown sugar, narcotics and other goods which cannot be sold is black money. The cost of these goods is so high that dealing in them makes billions of rupees. Since the dealings are illegal, the money is not genuine earning but black or illegal wealth. There are international smuggling rackets which facilitate this kind of trade. India is supposed to be on the transit route for these kinds of goods coming from West Asia to South East Asia or vice-versa. Then there is smuggling of goods on the borders, viz. the borders between India and Pakistan, between India and Nepal, India and Bangladesh and India and Myanmar. Despite a tight vigil by Border Security Force, goods worth crores of rupees are smuggled from and into India everyday. The smugglers have millions of rupees as black money. Politicians in India have a large amount of black money. Most of them have assets worth crores of rupees-much more than their known sources of income. Cases are pending in courts against many of them on charges of having acquired these assets by illegal means. The ministers while in power collect money, mainly from big businessmen for allotment of petrol pumps, plots of commercial land, licenses for doing particular business like liquor contracts, setting up Special Economic Zones, etc. In their tenure they accumulate several crores of rupees. Nobody checks them though everybody knows it. The cases filed against them yield no result. The executive classes including the bureaucrats are the other class of people who have accumulated black money by taking bribes. Some of the bureaucrats who have been under the radar of income tax authorities were caught with properties and other assets, including cash of crores of rupees. Our executives and bureaucrats are also having hundreds of crores of rupees as black money. The black money is illegally acquired money. A large part of it is avoided tax. Thousands of crores of rupees which should have gone to the government coffers go to the personal accounts of black marketeers. If the government had received this money it would have used it to take up new projects of development or would have completed the ongoing projects in shorter time.

The government would have built new hospitals, schools, colleges, roads, set up more industries, etc. thus, the black marketeers have blocked the countrys development for their personal greed. The bureaucrats and politicians who have accepted bribes have made huge money for them, and they have encouraged favouritism, making allotments to undeserving people. This does not augur well for society. Our country is the greatest democracy in the world. It upholds the values of fairness and quality. Such favouritism and pick and choose for bribery and gratification is against the principles of democracy. Black money is docile money. It does not play any economic function. Thousands of crores of rupees lie idle in lockers and benami accounts making no contribution to the development of the country. India, at the threshold of fast economic development, needs huge amount of capital. The government funds are short because of tax avoidance and other corrupt practices by the hoarders of black money. If the black money reaches the government, there will be faster development. Some people believe that the black money in India is a parallel economy worth thousands of millions of rupees. It is also performing an important economic function. This money creates demand for goods and services helping the industry and producers of services. Lying in bank accounts whether in benami or other accounts, this money is utilized by banks for lending purposes to needy businessmen. Despite these arguments, one has to say that the accumulation of black money is a poor reflection on our society. Corruption and tax avoidance must be dealt with a heavy hand so that the dues to the government reach it and are utilized for the benefit of the society.