By : M.S.Yatnatti: Editor and Video Journalist Bangalore :The governments worldwide must think reason foe why so much black money is generated and why majority of earners want to hide the earned money need to be researched and debated. And why the tax heavens have been created in several countries and why several countries have tax free or duty free shops and why few countries have no taxes where black money does not exists.Indian Government also need to think why we have direct and indirect taxes and both taxes may be burden to citizens .Pay taxes for earning and pay taxes for expenditure. Government need to debate this issue seriously and study the world wide concepts which are evolving in financial sectors. Indian government can seriously think of reducing the black money component.
A large part of the black economy accrues not from illegal sources of wealth but disincentives to legal transactions. As a 2012 ministry of finance white paper on black money pointed out, real estate lubricates tax evasion because of a high property transaction tax in the form of stamp duty , greater than 5% in many states, and in a sector where other costs to enable a one-time transaction remain high. This is where we need reform, so people are incentivised to pay tax, not driven away by what they see as an unfairly high cost. The problem of black money is structural. This is why we need inwardfocussed systemic changes, even as we clean up global tax havens servicing the high and mighty. Clean up global tax havens but India's deeper problems lie in domestic kala dhan. Reportedly Revelations from 11.5 million documents and 2.6 terabytes of data sourced from the Panamese law firm Mossack Fonseca bigger in size than US diplomatic cables made public by Wikileaks in 2010 or secret files released by Edward Snowden in 2013 show much more than clever legal wordplay , uncovering a diabolically organised system of tax evasion by the world's elite but to me every thing cannot be said to be illegal..
Nothing illegal: in owning a company in abroad and investing aboard under LRS. Those who have invested clean money abroad or in panama need not worry and those who have invested illegal money only need to be worried .The government has set up a multiagency team to investigate alleged offshore holdings of about 500 Indians named by the International Consortium of Investigative Journalists (ICIJ). Finance minister Arun Jaitley promised strict action against any "unlawful" accounts. The probe was ordered after PM Narendra Modi discussed the issue with the FM."The multi-agency group will comprise various government agencies -the CBDT, FIU (Financial Intelligence Unit), FT&TR (Foreign Tax and Tax Research) and RBI. They will continuously monitor these (accounts) and whichever accounts are found to be unlawful, and strict action as per existing laws will be taken," Jaitley reportedly said. The amount and purpose of remitting money abroad has historically been tightly controlled by the RBI. Till 2004, all investments abroad required prior approval of the central bank. Sending money overseas by resident Indians was made simpler in 2004 with the introduction of the Liberalised Remittance Scheme (LRS). Since then, the amount of money that can be remitted without approval has been increased by 10 times -from $25,000 to $250,000.Along with liberalisation, disclosure norms under other legislations have been changed. For example: details of foreign assets have to be disclosed in the I-T returns. Under LRS, all resident individuals (including minors), are allowed to remit up to $250,000 in a financial year for any permissible current account (such as for medical treatment or education) or capital account transactions (such as buying property overseas, or holding shares in an overseas company) or a combination of both. No prior permission from the RBI is needed.On June 1, 2015, the RBI reiterated that the permissible capital account transactions include the following: opening of foreign currency account abroad with a bank; purchase of property abroad; making investments abroad; setting up wholly owned subsidiaries and joint ventures abroad; and extending lo ans to NRI relatives.
Have tax disclosure norms been strengthened:For the first time, in respect of the financial year 2011-12, resident individuals had to file details of foreign assets in their income-tax returns, which included: bank accounts held in foreign countries (details of the bank, the account held and peak balance during the year); financial interest in a foreign entity (including the investments made); overseas immovable property , any other assets held outside India.The disclosure details have been tightened with the income-tax returns for the financial year 2014-15 calling for disclosures in foreign trusts (even if the Indian resident taxpayer was a beneficiary or trustee).Failure to furnish I-T returns or furnishing incorrect details entails significant penalty of up to Rs 10 lakh and imprisonment of up to seven years.
According to reports "The cash assets on which taxes have not been paid is termed BLACK MONEY .Largely it exists in all taxed economies except NO TAX COUNTRIES like UAE ".Economy does not recognize color of money but govt does. As long there are taxes, there is scope for BLACK MONEY. It is not possible for taxing countries to do away with BLACK MONEY. However, dilutions are easily possible. Black money and corruption have in every country. So, a model cannot eradicate these problems from the society. If the government become more conscious and people become honest then they can be reduced. Corruption is nothing new in any country and any society. Every human being is opportunistic in one way or other. If a student gets chance to copy for good marks he will do.Everybody wants quick benefits with less hard-work, that's why when opportunity arises nobody thinks about welfare of others. So the only way to contain it is severe laws and strict enforcement. but then the question arises what if the law-makers are corrupt. That's exactly what happens in poor and least developed countries the most.Corruption may also be existing in developed countries, but it won't be affecting the day-to-day life of millions of people. So that's why corruption is more a topic of behavioral economics. Corruption and black money can be modeled but i don't think some empirical or mathematical model can wipe out these problems from the country until or unless the people+politicians+bureaucrats are fully determined to do so. For me only one unique to eradicate the corruption in the world is firm belief in God and punishment one will get Hereafter for disobeying Our Lord. otherwise there is no model or theory which will guarantee that corruption will be eradicated.
First things first - Black Money already exists in India, and the volume of black money is so high that India has a parallel economy running which does not need a bank, or a capital market to let this money circulate. If additional Black Money comes, some of it will continue to stay in that form only. A part of the black money will sure get converted into White money.I believe you are more interested in knowing the impacts of Black Money in your day to day life. Black Money leads to an increased prices of essential goods. It also gives a boost to real-estate. The demand for Gold & Diamond jewellery kick-in.However, not all is bad with black money, if at all people holding it start spending at the right channels. Black money will automatically become accountable and start helping the Indian economy, if people holding it start using it at those outlets which come under the Tax structure, and they pay their taxes religiously.The problem with big-ticket items is that they have a KYC procedure and hence no one holding Black Money spends in those avenues, or does it with a tact (which yet again doesn't let money become taxable, like real-estate). So, such people at best could start spending their money in Branded stores (which have to comply with Government Rules and mostly pay taxes pretty religiously).Also, one must keep in mind that entire Indian grass-root workers survive on unaccounted money, which is as good as Black Money. If they can be provided an avenue to deposit their money on a daily basis, a lot of Black Money would find its way into mainstream economy. [A very small, yet effctive, start has been made by the Government of India through their Jan Dhan scheme. Hope it will contain a large part of Black Money in the decades to come.]