Black money menace & the ways to curb it
The Scourge of black money
India has long been plagued by the menace of unaccounted money – the wealth that is created, possessed, or transferred without the knowledge of the taxing arm of the government. The wealth, mostly ill-gotten, goes by euphemism ‘black money’. It is so ubiquitous that politicians, film script writers, businessmen, professionals, and even school children talk about it with no sense of shame. Tragically, a property dealer, or a trader offering to accept or make payment strictly through check is looked upon as an ‘abnormal’ citizen, out of touch with modern times. Such is the distortion of ethical values in our society.
The unaccounted wealth has played havoc with the socio-economic fabric of our society. At the root of most ills we see today is this scourge of ‘black money’. Many experts and institutions have tried to assess the size of this gargantuan monster. Their estimates vary greatly. Such discrepancy is understandable as cash transactions done outside the banking system seldom leave any trail. Often wild guesses are made about the money stashed abroad. For the common man, it is this wealth which has left the shores of India possibly for good that causes the maximum consternation.
There is clearly a need to estimate the black money both inside and outside the country. The more robust the method of estimating the black money, the easier will be the task of unearthing it.
Very recently, the National Institute of Public Finance and Policy has unveiled a report that pegs the size of the parallel economy at three fourths of the GDP. This figure where 75% of the nation’s GDP is hidden below the radar is very disturbing indeed. The loss to the national exchequer through lost taxes and duties is massive. For a resource-starved country like India, leakage of government’s income in such massive scale is alarming. The country runs budget deficits year after year, and can’t undertake important development projects due to paucity of resources. In such a scenario, if a part of this lost income can be claimed by the government through higher recovery of taxes, the chronic budget deficit will vanish and the country can garner funds for the infrastructure and other sectors crying for investment.
The NIPFP study has identified four major founts of black money. These are property transactions in real estate sector, mining business, private education, and, most regrettably, diversion from government subsidy schemes.
Diversion of subsidised kerosene to the open market alone has generated a whopping Rs.11,910 crore. This is about 50% of the total government subsidy provided for kersonene last year. One can’t ignore the possibility of still bigger leakages in respect of other subsidies, and social welfare schemes.
The largest contributor to the black money kitty is the murky real estate sector where nearly every transaction has a fair component of black money. The amount involved is mind-bogglingly large. It is estimated to be as big as the Plan expenditure of the government. Recent modifications to the property registration process such as the need for the PAN card, photograph of the seller etc. have brought in some degree of transparency to the process, but it is not enough.
The more effective way of curbing undervaluation of properties at the time of registration seems to be the regular revision of guideline values of properties. We often see that guideline values are substantially lower than prevailing market prices. , This allows registrations at lower prices. The loss of stamp duty is considerable. Apart from this, with every transaction huge amounts of black money gets pumped into the system. This underlines the need for aligning the guidance values with the market rates.
The mining industry is another big offender with regard to generation of black money. Mining companies routinely under-invoice sales, under-report output, and inflate expenses. All these practices can be curbed very effectively if the state mining department, railways and the income tax department work in tandem with the banks. Political will and vested interests have stood in the way of such administrative unity.
To prod greater degree of compliance by companies and individuals, taxation rules, rates and payment procedures must be made less cumbersome and more user-friendly. The present public perception about sales tax, income tax and customs officials is rather hostile. This has to change. They should work to foster an atmosphere where the tax-paying entities feel happy to pay their government dues promptly and truthfully.