Professional Documents
Culture Documents
DEPARTMENT OF ECONOMICS
PROJECT REPORT ON:
IMPACT OF BLACK MONEY ON INDIAN
ECONOMY
Table of Contents
Serial
Topic
Page
No.
1
Objectives
Introduction
Methodology
6-11
12-15
16-18
No.
19-20
Money
8
21-22
23-24
10
Conclusion
25
11
References
26
OBJECTIVE
INTRODUCTION
Black money simply it means income earned illegally, usually in cash, and
not reported to the government so as to avoid paying taxes on it.
Its has a wider terminology attached to it which accommodates various
activities and transactions as the means for black money i.e. hoarding, black
marketing, gambling, Smuggling, human trafficking, under valuation of
assets, false income statement to name a few.
Methodology
U.S. is not even there in the counting in top five! India has more money in
Swiss banks than all the other countries combined.
TOP FIVE
COUNTRIES
AMOUNT
(billion $)
INDIA
RUSSIA
$1,456 bn
$470 bn
7
U.K
UKRAINE
CHINA
$390 bn
$100 bn
$96 bn
India with $1,456 billion or $1.4 trillion has more money in Swiss banks
than rest of the world combined. Public loot since 1947:
It is 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.
DISHONEST INDUSTRIALISTS, scandalous politicians and corrupt IAS,
IRS, IPS officers, film actors, illegal trade and protected wildlife operators
have deposited in foreign banks in their illegal personal accounts a sum of
about $1456 billion, which have been misappropriated by them. This amount
is about 13 times larger than the country's foreign debt. With this amount 45
crore poor people can get Rs 1,00,000 each.
This huge amount has been appropriated from the people of India by
exploiting and betraying them. Once this huge amount of black money and
property comes back to India, the entire foreign debt can be repaid in 24
hours. After paying the entire foreign debt, we will have surplus amount,
almost 12 times larger than the foreign debt. If this surplus amount is
invested in earning interest, the amount of interest will be more than the
annual budget of the Central government. So even if all the taxes are
abolished, then also the Central government will be able to maintain the
country very comfortably.
Some 80,000 people travel to Switzerland every year, of whom 25,000 travel
very frequently. 'Obviously, these people won't be tourists. They must be
Fig.1
Bars
show
illicit
10
11
12
13
14
12. Land and real estate transaction: The taxes applicable on real estate
transactions in form of stamp duty and capital gains tax can be avoided by
under-reporting of transaction price.
13. Bullion and Jewellery Transactions: Cash sales in the gold and
jewellery trade allows the buyer to convert black money into gold and
bullion, while the trader can keep his unaccounted wealth in the form of
stock, not disclosed in the books or valued at less than market price.
14. Financial market transaction: Financial markets can generate black
money, especially in IPOs by rigging of the markets.
15. Public procurement: The total public procurement figure for India has
grown phenomenally and is currently estimates at around Rs 10-11 lakh
crore per year giving ample opportunity for creation of black money.
16. Non profit sector: Taxation laws allow certain privileges and incentives
for promoting charitable activities. These can be misused through entities
claimed to be constituted for nonprofit motive and are among possible
sources of generation of black money.
17. Informal Sector and Cash Economy: Dependence on agriculture,
existence of a large informal sector, and insufficient banking infrastructure
with large un-banked and under-banked areas have meant huge cash
transactions in the economy making it vulnerable to more black money.
18. External trade and Transfer Pricing: More than 60 per cent of global
trade is carried out between associated enterprises of multinational
enterprises who function across geographies. They might manipulate to take
15
use of different taxation regimes they work across giving rise to more black
money.
19. Trade-based Money Laundering: This is the process of disguising the
proceeds of crime and moving value through the use of trade transactions in
an attempt at legitimising their illicit origins.
20. Tax Havens: These are typically characterised by no or very low taxes,
lack of effective exchange of information, and lack of transparency about
substantial activities. Though they have agreed to share more information
over time, they can be used to generate more black money.
21. Off shore financial centres (OFC): Some of the old tax havens have
adopted the more benign designation of OFC and tend to describe
themselves as financial centres specializing in non-residential financial
transactions. They generally can also generate black money with their array
of secrecy provisions that lack regulation.
16
17
(iii) Tax structure: High tax rates and defective tax structure have also
been responsible for the existence of black money to a large extent. Take for
instance direct taxation. Till recently the tax on income and on wealth was
very high to invite evasion. The marginal rate of income tax was as high as
75 per cent. In these circumstances the temptation / gain from tax evasion
was substantial. Even in the case of indirect taxes the situation is no better.
In fact worse, as the revenue from these taxes constitutes a big proportion of
all the tax revenues.
(iv) Donation to political parties: Ever since the Government decided to
ban donations to political parties in 1968, it prompted businessmen to fund
political parties, especially the ruling party, with the help of black money.
Ostensibly, this decision was taken to reduce the influence of big business on
the electoral process, but in practice what happened was precisely the
opposite.
(v) Ineffective enforcement of tax laws : Whereas the Government has an
armoury of tax laws pertaining to income tax, sales tax, stamp duties, excise
duty etc., their enforcement is very weak due to widespread corruption in
these departments. The high rates of these taxes induce businessmen to
avoid recording of these transactions. This evasion largely goes unchecked
and thus sets in a chain reaction for the generation of black money at the
wholesale, retail as well as production levels.
(vi) Generation of black money in the public sector: Every successive
five-year plan is planned for a larger size of investment in the public sector.
The projects undertaken by the public sector have to be monitored by the
bureaucrats in Government departments and public sector undertakings.
18
Tenders are invited for the various works and these tenders are awarded by
the bureaucracy in consultation with the political bosses.Thus, a symbiotic
relationship develops between the contractors, bureaucracy and the
politicians and by a large number of devices costs are artificially escalated
and black money is generated by underhand deals.
(Vii) Ceiling on depreciation and other business expenses: Government
has
imposed
restriction. It
has also
circumscribed
expenses
on
19
to
Charity
(Anonymously):
Simply
donating
20
officially because the giver and taker both will face government
problem. In this way, you cant convert the Black money to white
money instead you can use your black money. It is again Black money
for the recipient.
4. Investing in Movies: Now, the Black money is invested in
Bollywood to make the money white. But not directly.
5. HAWALA: It is one of the Famous method used to convert Black
Money to White Money. Money is transferred via a network of hawala
brokers, or hawaladars. A customer approaches a hawala broker in
one city and gives a sum of money to be transferred to a recipient in
another city. The hawala broker calls another hawala broker in the
recipient's city, gives disposition instructions of the funds (usually
minus a small commission), and promises to settle the debt at a later
date.
6. Through Real Estate: The BM holder buys land worth 20 lakhs. But
he shows the government that he bought that land for 1 crore. With a
loss of 20 lakhs, remaining 80 is converted into white! (with a land
worth 20 in the BM Holders hand)
21
22
23
24
25
Conclusion
Whatever rules and regulations that our government put in to action to
eradicate the Black Money, our peoples will find a loop hole to do the same
mistake again. So, the total eradication is in hands of the Citizens of India.
If this situation persists the Rich with get richer and the poor will become
poorer. We, the Citizens of India should help our Country to Develop by
killing the evil Black Money, that itself will lead to reduction of the unlawful
activities like corruption, tax evasion etc. and lead our country to the mark of
a Developed Nation.
26
REFERENCES
http://theglobaljournals.com/paripex/file.php?
val=January_2014_1389888798_5b59f_04.pdf
https://www.scribd.com/
https://www.equitymaster.com/5minWrapUp/charts/index.asp?
date=06/24/2014&story=1&title=Black-money-A-major-threat-toIndian-economy