India

black money problem

Jayantilal Bhandari

Keeping money in tax evasion-friendly countries causes governments around the world to lose $427 billion in taxes every year. The pace of outflow of dishonest money from developing countries is increasing. Its direct impact is seen on the economy and development.

The process of hoarding black money is increasing continuously in the countries which are considered to be tax havens. Although the work of global financial organizations and governments around the world to combat black money has also been less, strict laws are being made, agreements are being made between countries for cooperation on this issue, but instead of reducing the problem, the problem is increasing. has been Recently, in the summit of the Group-20 countries, agreeing to raise the minimum global corporate tax to 15 percent among the member countries can become an important measure to curb the growth of black money in countries that are vulnerable to deprivation. By ensuring the same minimum rate of tax in all countries, MNCs will not be able to move their business and their income to countries with low or zero tax rates except in one country. This will help in controlling black money in a big way.

In October this year, the biggest case of disclosure of black money in the world came to light in the form of Pandora Papers leak. In this, big revelations were made about the financial transactions of the influential people around the world. The Pandora Papers report was prepared by the International Consortium of Investigative Journalists (ICIJ) after a thorough investigation. This report is an investigation of about 12 million documents, made with the help of six hundred investigative journalists from one hundred and seventeen countries. In this investigation, it was found that how big politicians, money-kubers and celebrities of more than two hundred countries around the world, including India, kept money in British Virgin Islands, Seychelles, Hong Kong and Belize etc. to save money and secret investment of their black money. Is. The names of more than three hundred Indians are also included in this report.

In such a situation, the Multi Agency Group (MAG) has started investigation by holding its continuous meetings in relation to Pandora Papers. The multi-agency group, headed by the head of the Central Board of Direct Taxes (CBDT), includes officials from the Enforcement Directorate (ED), the Reserve Bank and the Financial Intelligence Unit. It is worth mentioning that in the year 2017, seventy million loan agreements, financial statements, e-mails and trust deeds were exposed through more than one crore thirty four lakh confidential electronic documents under Paradise Papers. Among them the names of seven hundred and fourteen Indians were also revealed. Prior to this, in the year 2016, under the Panama Papers, 15 million sensitive financial documents were revealed, which contained money laundering records of global corporates. Then the names of five hundred Indians were revealed.

Cases of tax evasion and black money laundering show how some of the world’s most powerful people use bogus companies in such small countries to hide their wealth. Tax haven countries are those countries where it is easy to create fake companies and there is very little tax or zero tax. These countries have laws that make it difficult to trace the identity of the owner of the company. Black money is money on which income tax is liable, but its information is not given to the government. The source of black money can be either legal or illegal. Money earned through criminal activities like kidnapping, smuggling or forgery etc. is also called black money. Money earned from drug trade, illegal arms trade, extortion, ransom and cyber crime is also secured in these fake companies so that this black money is converted into white money in their country.

According to a report by Oxfam India, keeping money in tax evasion-friendly countries causes governments worldwide to lose $427 billion in taxes every year. Developing countries are most affected. The pace of outflow of dishonest money from developing countries is increasing. Its direct impact is seen on the economy and development. Keeping money secretly in foreign countries also has a direct impact on the welfare of the common man.

The debate on black money in India is decades old. Official data related to black money of Indians in foreign banks is not available. But economists believe that it can be around seventy three lakh crore rupees. According to a report by the Swiss National Bank, till the year 2020, the deposits of Indian citizens and companies in Swiss banks were more than twenty thousand seven hundred crore rupees. According to the National Council of Applied Economic Research, between 1980 and 2010, black money accumulated outside India was in the range of $300 billion to $490 billion.

There is no doubt that many steps have been taken to deal with black money in the country like Aay Ghoshma Scheme, Voluntary Declaration Scheme, reduction in tax rate, removal of trade control after 1991, changes in tax laws before now. Legislations have been enacted in recent years that allow tax officials to ensure that taxpayers do not evade tax. It added a ‘Know Your Customer’ (KYC) mechanism in which transactions in a particular area are required to reveal their full identity, so that that information can be shared with other areas. But still, there has been no reduction in the increase of black money and remittance of black money from the country to foreign countries. The mere news of getting the list of account holders of black money deposited in foreign banks cannot be seen as a big success. Success will be considered only when most of the black money stashed abroad is returned to the government accounts.

The way the Central Government had ordered a multi-agency investigation to disclose the secret financial assets of the country’s celebrities abroad on the revelations of Panama Papers and Paradise Papers, now this time also the multi-agency of Pandora Papers. The investigation has been ensured. But now the investigation work in the Pandora Papers leak case should not remain in the old and normal style. Since these cases pertain to the influential section, the investigative action should be stringent. Strict laws need to be made for those who break investment norms abroad.

The problem of black money is directly related to corruption. Obviously, unless corruption is curbed, it is not possible to tackle the problem of black money. India ranked sixth in the Transparency International’s Corruption Index for 2020. Certainly, miles must be walked to control corruption, black money and pilferage in foreign banks.

Since political funding is the biggest challenge to control corruption and black money in India, strict steps have to be taken to stop the use of black money in funding political parties. Now to control corruption, bureaucracy reforms, strictness in the implementation of anti-corruption laws, speedy disposal in courts, transparency in administrative matters, and various concrete measures to remove corruption and control black money will have to be moved forward. It is to be expected that the decisions taken in the Group-20 summit will reduce the flow of black money to some extent.

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