6. Black money

The black money is accumulated by the criminals, smugglers, hoarders, tax-evaders and other anti-social elements of the society.
The root cause for the increasing rate of black money in the country is the lack of strict punishments for the offenders.

 

 

Effects of Black Money on the economy
1. Dual economy - the increase in the amount of black money in India gives rise to dualism, that is -  a parallel economy (black money economy) operating side by side with the official or reported economy in the country.

2. Tax evasion- Tax evasion is an illegal activity in which a person or entity deliberately avoids paying a true tax liability. Thereby loss of revenue to the Government.

3. Undermining equity - When underground activities like smuggling etc., could not be taxed, the Government will impose higher taxes on officially sanctioned activities. Thus, equity in taxation cannot be achieved.

4. Widening gap between the rich and poor.

 

5. Lavish consumption spending - Black money is disposed of by lavish spending on travels and tours, entertainment.

6. Distortion of production pattern - The black money has altered the choices in the market in favour of luxuries.

7. Distribution of scarce resource -Black money holders are always in a position to put their prior claim over the scarce goods in the market due to their readiness and ability to pay more, thereby depriving the honest and poor people of their legitimate share.

8. Effects on production -   The consumption pattern is titled in favour of the rich and elite, at the cost of encouraging the production of articles of mass consumption. A rise in overall consumption leaves fewer resources for investment in priority areas, having an adverse effect on production.

 

1. Under pressure from India and other countries, Switzerland has made key changes in its local laws governing assist foreign allegedly stashed in Swiss Banks.
2. Special Investigation Team appointed by government on the directions of Supreme Court on black money.
3. Demonetization -In India, On \(8\)-November-\(2016\), the Government of India announced the demonetization of all \(500\) and \(1000\) banknotes against Black Money.

 

Some Legislative Framework in India against Black Money
1 Prevention of money laundering act \(2002\)
2 Lokpal and Lokayukta act
3. Prevention of corruption act- \(1988\)
4. The undisclosed foreign Income and Asset Bill(Imposition of Tax) \(2015\)
5. Benami transactions prohibition act \(1988\), amended in \(2016\)
6. The Real Estate (Regulation and Development) Act, \(2016\)