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Financing for development final project-mohammad allam


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Financing for development final project-mohammad allam

  1. 1. Financing For Development From Billions to Trillions: Black Money –An Indian Financial Problem For Development Mohammad Allam Financing For Development World Bank Group MOOC December 2015
  2. 2. • Introduction: Black money is an important problem for developing countries like India. It is assumed that a large amount is transferred outside of the country illegally. There are also cases of the large sum hiding within the country without taxation. There is need to control the black money for the better management of financial resources and development of the country. • The aim of this project is to study the problem of black money in Indian context.
  3. 3. What is Black Money? • Black Money is defined as an income which has not been reported for tax or obtained illegally by a person, an organization or an authority.
  4. 4. Why Black Money is So Important? • For Knowing the real national Income of the country • For planning of the national development by accumulating all sources of the nation • Saving nation from going into hands of corrupted people • To make possible the fruits of development to reach each and every citizen • To eliminate the security threat to the nation • To make the financial position of the country strong • To stop concentration of political and economic powers in few hands • To make the democracy function smoothly and meet the inspiration of the people • To stop forming an international group threatning to international peace and security
  5. 5. Some Facts about Indian Taxation • There are 1.2 billion people as per 2011 census of India in which the tax payers are 35 million only. • Out of 35 million tax payers about 89 % are those who comes in tax slab of 0-5 lakhs rupess,1.3 % having income about 20 lakhs and 0.1% having taxable income exceeding 1 crore. • Just 3% people in India pay taxes. • Source: 01/news/38958335_1_tax-compliance-tax-base-35-million-taxpayers
  6. 6. Black Money (illicit financial outflows) in International Context-Some Facts • As per the Global Financial Integrity study “developing countries lost an estimated$858.6 billion (about Rs 43 lakh crore) to $1.06 trillion (about Rs 51 lakh crore) in illicit financial outflows”. • Of all the illicit financial flow from developing countries,50% is counted from Asia alone • Africa illicit financial outflows is about 50 billion USD which is double the aid she receives under ODA(Official Development Assistance)
  7. 7. Black Money in Indian Context –Some Facts • Estimation • As per one report there 16.4 Trillion US Dollars of India is stashed in Foreign Banks( swiss-black-money-can-take-india-to-the-top.htm) • Global Financial Integrity study reports that India lost 27.3 billion USD during 2002-2006 • As per the reports Indian illicit financial flow might be reached to more than 40 destination worldwide(Source: Internal Revenue Service USA on Abusive Off-shore Tax Avoidance schemes –Talking Points Jan 2008) • As per the “White Paper on Black Money in India report, published in May 2012, Swiss National Bank estimates that the total amount of deposits in all Swiss banks, at the end of 2010, by citizens of India were CHF 1.95 billion (INR 92.95 billion, US$2.1 billion)”(. nanjappa-1)
  8. 8. Indian Government Initiatives against Black Money • Establishment of numerious institutions like Central Board of Direct Taxes, Enforcement Directorate, Central Board of Excise and Customs and Directorate of Revenue Intelligence, Central Economic Intelligence Bureau, Financial Intelligence Unit etc for control on financial transaction • Constitution of committee to tackle the problems of Black Money like M. C. Joshi Committee • Tax Information Exchange Agreements with the countries around the world to control black money • Encouragement for voluntarily disclosure of black money by giving relaxation in taxation • Strict control on banking transaction • Discouraging the non-banking transactions of money • Reforms in many sectors of the economy which encourage the practices of black money • The Government uses to issue the modified currency from time to time to make black money hoarding difficult • India Joined hands with international community by joining Task Force on Financial Integrity and Economic Development • India became 34th member of Financial Action Task Force(FATF) • India joined Eurasian Group (EAG) in 2010 and Egmont Group-an international networking of financial intelligence units
  9. 9. Result of the Policies of Indian Government against Black Money • The Government of India under Prime Minister ship of Honourable Narendra Modi promised to bring black money from foreign countries within hundred days. • In recent time the government initiative known as black money compliance window earned RS 3,770 crores from 638 declarations in October 2015.( 3770-crore-disclosed-under-black-money-window/story/224303.html) • Rs 6,500 crores foreign assets have also been disclosed • The government is working with the Judiciary, foreign countries and financial establishments to sort out the black money problems.
  10. 10. What Should be Done? • There should be strict control on illicit financial outflow from the country. So, resources should be available for the development of the country. • There should be provision of mandatory filing to each and every citizen of the country. So, nobody could hide illegal income. • There should be international obligation on each and every country to stop the illicit financial outflow. • The bank of each country should be penalized for promoting and helping illicit financial outflow from one country to another country. • United Nation(UN) should make the law against the financial institutions which promotes illicit financial outflow world wide. • Official Development Assistance should be given to the country which discourage out flowing of the black money. • Countries around the world should promote political instability by discouraging the autocratic and dictatorial rulers. • The taxation system of the country should be simplified and tax charges should be low. So, the people could come themselves to pay taxes.