What is Black money and its impact

Black Money

• There is no uniform definition of black money in the literature or economic theory.

• It also refers to' unaccounted income ',' black income ',' dirty money ',' black wealth ',' underground wealth ',' black economy ',' parallel economy '," shadow economy ", and "underground "or" unofficial" economy.

• It refers to wealth earned through illegal means and wealth earned through legal means but concealed from public authorities.

• Money earned through illegal activity is obviously not reported to tax authorities, and neither is black money.
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  • Legal but Unreported Activity: The second category comprises income from legal activity that is not reported to the tax authorities.

  • Examples of Sources of Black Money

    • Multi-Level Marketing Scheme Black money: international debit or credit cards issued by offshore banks are used to create black money.
    • Disguised Ownership: Increasingly, criminals want to own legitimate businesses. It could be to earn a return or to convert black money into white.
    • Mixing illicit money sources with legit ones is a popular method because it’s hard to detect, especially if there is a large cash component in the legal business.
    • Flooding : This type of transaction is usually done to evade notice by authorities monitoring transactions above a certain threshold. Trade Mispricing:
    • Traditionally, goods exported and imported were either priced lower or higher to enable money laundering.
    • Money Transfers To Binami Entities: In a Benami transaction, a property is transferred or held by one person and the consideration for such property is paid by another person for whose benefit the property is held.

    Legislative Action:

    • The Fugitive Economic Offenders Act, 2018
    • The Central Goods and Services Tax Act, 2017
    • The Benami Transactions (Prohibition) Amendment Act, 2016
    • The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
    • The Prevention of Money Laundering Act, 2002
    • Gold Amnesty scheme: This is similar to the Voluntary Income Disclosure scheme to tap black money in income taxes.

    Institutions to Deal with Black Money:

    • The Central Board of Direct Taxes
    • Enforcement Directorate
    • Financial Intelligence Unit The Central Board
    • of Excise and Customs and DRI The Central Economic
    • Intelligence Bureau The National Crime Bureau
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    • Serious Fraud Investigation Office
    • The Registrar of Companies and the Registrar of Societies (ROS)
    • The Bureau of Immigration (BOI)
    •  The NCRB is the National Crime Records Bureau.
    • The National Investigation Agency (NIA)
    • The CBI and police authorities The State
    • Police Authorities and the Economic Offences Wing (EOW) of the Police function under the administrative control of the states.
    • The Inter-Ministerial Coordination Committee on Combating Financing of Terrorism and Prevention of
    • Money Laundering (IMCC)
    • The Economic Intelligence Council (EIC)

    International Initiatives:

    • Double Taxation Avoidance Agreements (DTA As).
    • Automatic Exchange of Information
    • Multilateral Convention on Mutual Administrative Assistance in Tax Matters
    • The United Nations Convention Against Corruption: The United Nations Convention Against Corruption: The United Nations
    • Convention against Transnational Organized Crime The International
    • Convention for the Suppression of the Financing of Terrorism

  • Way Forward

    Since, black money menace is still untamed, therefore a lot more needs to be done to tackle it. Some of the strengthening steps that can be taken are:

    • Appropriate legislative framework related to: Public Procurement, Prevention of Bribery of foreign officials, citizens grievance redressal, whistleblower protection, UID Aadhar.
    • Setting up and strengthening institutions dealing with illicit money: Directorate of Criminal Investigation Cell for Exchange of Information, Income Tax Overseas Units- ITOUs at Mauritius and Singapore have been very useful, Strengthening the Foreign TAX, Tax Research and Investigation Division of the CBDT.
    • Electoral Reforms: Elections are one of the biggest channels to utilize the black money. Appropriate reforms to reduce money power in elections.
    • Imparting skills to personnel for effective action: Both domestic and international training pertaining to the concerned area. For instance, the Financial Intelligence Unit-India makes proactive efforts to regularly upgrade the skills of its employees by providing them opportunities for training on anti-money laundering, terrorist financing, and related economic issues.