Introduction: Black money is basically the accumulation of income obtained illegally. It is not declared for tax purpose. The problem of black money is not new to our country. Money generated via various illegal sources and the attempt to hide it from the government for the purpose of tax evasion has been a common practice here. The accumulation of black money has several negative repercussions on society with the economic and social disparity being the major ones.
Sources of Black Money: Now the question remains that when there are so many negative impacts of black money then why isn’t the government taking steps to eradicate the problem? Well, the government is making efforts to free the country of black money however the sources of this ill practice are stronger than the policies imposed to get rid of it. It goes without saying that evasion of different types of taxes including the income tax, state taxes, corporation tax, excise duty, and customs duty is the key to generating black money.
Here is a look at the various other sources of black money:
- Black income via exports: A lot of black money is generated by businesses that export their goods.
- Black market: The good supplied in the black market are another source of black money.
- Stock Market: A lot of profit is generated via the stock market trade and most of it goes unaccounted. It is this unaccounted profit that makes for the accumulation of black money.
- Illegal commissions: Many government officials take illegal commissions from the general public for offering certain services. The income earned via this means is all black.
- Bribes: A lot of bribery goes on at different levels in the government as well as the private sector and this also contributes to black money.
- Scams: Scams done by politicians and other people in power are undoubtedly a major source of black money.
Private firms also generate black money through a method called “Transfer Mispricing”. The modus operandi used in this method is to manipulate the price of the transaction between two parties, in order to deceive tax agencies and benefit both the parties. Though the money is not earned by dishonest means, it is purposely hidden from tax authorities to evade taxation and is still considered black money.
Ways to Control the Problem of Black Money: It is important to control the problem of black money as it is hampering the growth and development of the country to a large extent.
Here are some of the ways in which we can control this issue:
- The tax system should be realistic. People must not see it as a burden. The high tax rate would only make people look for ways for tax evasion.
- The process of tax collection must be made more efficient. The government must take certain steps to award the officials who are dedicated and sincere towards this task so as to motivate more and more officials to take this seriously.
- The government must work on its price control policy as it is also one of the reasons behind the generation and accumulation of black money.
- The public sector projects must be monitored stringently so as to bring down their expenditure.
- The private sector investment expenditures must also be monitored effectively.
- The government must take action against the corrupt officials who in many ways contribute to the growth of black money.
- Administrative corruption must be controlled at various levels.
- The sale and purchase of properties must be thoroughly monitored by the IT officials to ensure that people do not hide any black money in the event.
- The politicians, celebrities, senior civil servants and media people must set an example for the general public to pay their taxes.
- Incentives should be given to those who provide voluntary disclosures of income.
The exchange rates must be realistic and should reflect our comparative rates and position in the world economy.
Conclusion: The government has taken certain steps to eradicate the issue of black money. The recent and one of the major steps taken in this direction was demonetization. While this step helped in eliminating black money to some extent many people condemned it. However, even if it helped, it definitely was not enough. A lot more needs to be done in order to stop this ill practice. The government must look for more effective measures to curb this problem. And remember, the government alone cannot bring this issue to an end. It can only be curbed if each and every citizen of the country contributes his bit.