do you know about black money or what is black money , there are hundreds of news about black money. There is a lot of talk these days about Black Money and about bringing back our Black Money from foreign tax havens isnt it? Though many of us read such articles and hope & pray that Indias Wealth from abroad comes back to us, not many of us actually know what Black Money is. The purpose of this article is to help you understand what BLACK MONEY is…The Salaried Middle-Class pays taxes promptly and has very little to 0 Black Money. Businessmen and Merchants who make a lot more money than the salaried middle-class have sneaky ways to avoid tax and end up amassing wealth which causes high inflation and economic divide. Unless the Government comes up with a blockbuster move like what Thalaivar Rajnikanth did in Sivaji move, this will continue.
So, What is Black Money?
All unreported incomes whether by legal or illegal means, and their subsequent use in consumption or investment constitutes ‘black economy’.
Some simple real-life examples to help you understand:
1. You go to a Pharmacist to buy some general meds like Crocin or Dolo. The Pharmacist asks you do you want a bill and you say No because if he writes a bill, he will charge you a couple of extra rupees (which he is supposed to pay as Taxes). Anyways, you saved a few rupees but whatever money you paid the pharmacist for your meds is “Black” in his hands.
2. You go to a Government Office and try to get something done. The Government officer asks for a “Bribe” and you pay him in Cash. This bribe that you pay is “Black” in his hands.
3. You are employed and also own an extra house that is rented out. You receive the rent each month but you dont show this amount in your Income Tax Returns. This Rent that you receive each month is “Black” in your hands.
4. Your Kids go for private tuition for subjects like Maths, Science etc. The teacher does not issue any receipts and accepts only cash as monthly tuition fee. This fee that you pay is “Black” in the teachers hands.
Do you remember Rajnikanth’s “Sivaji” movie? Any money that does not have a proper record and for which proper income tax is not paid by the person receiving it is considered BLACK.
Where is all this Black Money?
A Bulk or significant portion of this Black Money is right here in India. Most of it is stored away in underground safety Vaults and Bank Lockers as “Cash”. A lot of it is also stored in Bank Accounts in other people’s names (Benaami’s) or as assets & property registered on some family members names.
Easily 50% or more of India’s Black Money is in India and I remember reading an article by a renowned economist stating that our Government must actually beef-up measures to locate illegaly stashed away Black Money in our country first and work with foreign authorities in parallel because getting their cooperation is very difficult but getting people inside our country to cooperate is lot easy.
Anyways, the rest of the money is stashed away in foreign Tax Havens.
What is a Tax Haven?
A tax haven is a state, country or territory where people find it easy to make financial transactions. These countries usually ask very low questions and welcome any and al customers from foreign countries to deposit their money with them. The main feature of a haven is that its laws and other measures can be used to evade or avoid the tax laws or regulations of other jurisdictions. A Tax Haven Typically:
1. Has Nil or Very Low Tax.
2. Has strong Personal Information Protection and Confidentiality Laws. They will not divulge or share information about their customers with anyone.
3. Lack of Transparency. They will not cooperate (that easily) with Law Enforcement Authorities from other countries
4. No Questions Asked – Most of these countries allow banks and financial institutions to operate with customers with little or no info. You could just walk into a bank in these countries and deposit a million dollars in cash. Nobody will ask you why…
Our Government is actively Pursuing Switzerland to share the details of Indian account holders isnt it? Why? That is because Switzerland is one among the “Tax Havens” which are frequented by the “Super Rich” to stash away their Black Money.