- to evade payment of taxes
- to evade payment of other statutory contributions
- to evade minimum wages, working hours and safety standards, etc.
- to evade complying with laws and administrative procedures.
- The ‘criminal’ component of black money include proceeds from activities viz. racketeering, trafficking in counterfeit and contraband goods, forgery, securities fraud, embezzlement, sexual exploitation and prostitution, drug money, bank frauds and illegal trade in arms.
- The ‘corrupt’ component of such money would stem from bribery and theft by those holding public office – such as by grant of business, bribes to alter land use or to regularize unauthorized construction, leakages from government social spending programmes, speed money to circumvent or fast-track procedures, black marketing of price controlled services, etc.
- The ‘commercial’ limb of black money usually results from tax evasion by hiding transactions leading to evasion of one or more taxes. The main reason for such black economy is under reporting revenues / receipts / production, inflating expenses, not correctly reporting workers employed and avoiding statutory obligations for their welfare. Opening of the economy permits contracts of all kinds, particularly for allocation of scarce resources such as mineral and spectrum, which in the absence of transparent rules and procedures for licenses and non compliance of contractual obligations of the persons concerned, leads to increased generation of black money.
- Electoral reforms, including state funding of elections.
- Tightening of laws, increasing the severity of punishments, and trial of cases relating to illicit money generated and stashed abroad through fast track courts.
- Confiscation of undeclared assets or money kept abroad.
- Monitoring of persons travelling frequently to tax havens and persons indulging in frequent transactions overseas.
- Existing laws were enough to deal with economic offences but there was a need to strengthen the administrative mechanism to enforce the existing laws.
- Existing information exchange mechanism should be improved and additional manpower and financial resources provided to the investigating agencies to tackle the scourge of black money.
- Better regulation of the real estate sector, the largest contributor to black money.
- Maintaining the security of currency by upgrading the existing security features.
- The flow of information has improved but the information received can be used only for tax purposes.
- The huge economic cost of de-monetizing higher denomination bank notes of Rs.500 and ` Rs.1000 is not a feasible idea.
- For deterrent effect, fast-tracking through summary trials.
- Maximum punishment for serious offences under the PC Act are necessary to be enhanced from seven years to ten years.
- There should be limitation of carrying and holding of cash for personal use, for which either the existing laws may be amended or a new law enacted.
Corruption in the private sector is an issue not much in public focus or debate. Corruption flows from private motive or greed, fueled by discretionary powers vested in an office empowered to distribute resources, goods and services to public. Dishonesty in private sector, for private benefit or profit, is largely responsible for bribery, siphoning of public funds and leakages in public expenditure. It also results in conspicuous consumption, money laundering and sustenance of the black economy. The way to deal with private greed is to design well-laid down rules and regulations, and ensure their proper enforcement and transparency in decision-making without compromising trade interest.
Cash as an asset has its own demand. In large cash economies such as India, counterfeit currency poses a major threat to its economy, as it disrupts smooth commercial transactions and has a multiplier effect on mainstream economy. India faces this problem, as immigrants become carriers for small amounts. The Bangladesh, Pakistan and Nepal borders are targeted for this purpose by agencies inimical to the interests of India.
Demonetization of high denomination currency notes is believed to be one of the methods to ‘kill’ the extant black economy, and to curb the generation of black money. In India, demonetization was implemented in 1946 and 1978. Experts have criticized that demonetization did not achieve the objective it was aimed at. Further, inflation over the years and a large cash economy requires higher denomination currency notes to keep the cost of monetary management of the economy low.
There is no uniformity of methodology or approach, or certainty of estimation relating to ‘black’ money. The ‘shadow’ economy is not distinct, and the ‘parallel’ economy enmeshes the white economy. Thus, ‘black’ money exists to a substantial extent in our economy, its quantum cannot be determined exactly.