Black money problem

1. Presented By:
Nishmitha P H
2nd Mcom

2. What is Black Money?
 Income illegally obtained or not declared for tax
purposes.
 Black money is money which is earned through any
illegal activity controlled by country regulations. Black
money proceeds are usually received in cash from
underground economic activity and, as such, is not
taxed. Recipients of black money must hide it, spend it
only in the underground economy, or attempt to give it
the appearance of legitimacy through money
laundering.

3. Indian Black money

4.  In India, Black money
refers to funds earned on
the black market, on
which income and other
taxes have not been
paid.
 Total exceeding
US$50 trillion are
stashed in Switzerland's.
 Central Bureau of
Investigation said that
Indians have US$500
billion of illegal funds in
foreign tax havens, more
than any other country.

5.  In March 2012, the
Government of India
clarified in its parliament
that the CBI Director's
statement on $500
billion of illegal money
was an estimate based
on a statement made to
India's Supreme Court in
July 2011.[

6. Round-tripping of black money
 The unlawfully acquired money kept abroad is routed back to
India by round tripping processes. Round tripping involves
getting the money out of one country, say India, sending it to
a place like Mauritius and then, dressed up to look like
foreign capital, sending it back home to earn tax-favoured
profits.

7. Reason or causes for black money
Historical Reason;
 Shortages during World War II
 Faulty Taxation
 Redundant Control Measures
 Large Public Expenditure

8. Other causes:
 1. Unrealistic Tax Laws and Tax Frauds:
 2. Different Rates of Excise Duty:
 3. Control Policy:
 4. Quota System:
 5. Scarcity:

9.  6. Inflation:
 7. Elections in a Democratic System and Political
Funding:
 8. Real Estate Transaction:
 9. Privatisation:
 10. Agricultural Income:

10. Sources of Black Money
 Hawala:
 Economics of Gold:
 Rising share of services
 Under-invoiced
inventories:
 Over-invoiced plant and
equipments:
 Informal sector activities
including trade, films,
production etc.:

11. Illegal holding of precious metals, gem and
jewellery
Flight of capital for investments abroad
Illegal activities like smuggling, drugs,
prostitution, and crime:
Transfer activities (like secondary share market
and real estate) and buying of influence (bribe
for work):

12. Methods to estimate:
 Methods have been developed to estimate and evaluate the
illicit amounts of money, of which, two well-established
economic models are based on “Model of Capital Flight”.
The World Bank Residual model is based on change in
external debt or CED. The Trade Mispricing model which is
based on the IMF Direction of Trade Statistics or DOTS
database. But the problem with these methods has made the
task of estimators all more difficult as these methods cannot
capture genuine reversal of capital flight.

13. Conversion of black money
to white money:
Funding politicians:
Selling black income in form of jewellery:
Donation:

14. 2016 Panama Papers Leak
The 2016 Panama Papers scandal is the largest-
ever leak of information on black money in
history.[13] International Consortium of Investigative
Journalists first obtained the leaked information,
revealing over 11 million documents. These
documents pertain to 214,000 offshore entities and
span almost 40 years. The papers originated from
Mossack Fonseca, a Panama-based law firm with
offices in more than 35 countries. The list of names
exposed in the scandal includes 500 Indians who
flouted rules and regulations, such as Amitabh
Bachchan, Aishwarya Rai, Niira Radia,[14] KP
Singh, Garware family, Harish Salve, and others.

15. Black money in Swiss banks

16.  In early 2011, several reports Indian media alleged Swiss
Bankers Association officials to have said that the largest
depositors of illegal foreign money in Switzerland are
Indian.[1][19] These allegations were later denied by Swiss
Bankers Association as well as the central bank of
Switzerland that tracks total deposits held in Switzerland by
Swiss and non-Swiss citizens, and by wealth managers as
fudiciaries of non-Swiss citizens.[2][3][20]
 In August 2010, the government revised the Double Taxation
Avoidance Agreement to provide means for investigations of
black money in Swiss banks. This revision, expected to
become active by January 2012, will allow the government to
make inquiries of Swiss banks in cases where they have
specific information about possible black money being stored
in Switzerland.[22]

17.  In 2011, the Indian government received the names of 782
Indians who had accounts with HSBC. As of December,
2011, the Finance Ministry has refused to reveal the names,
for privacy reasons, though they did confirm that no current
Members of Parliament are on the list. In response to
demands from the Bharatiya Janata Party (BJP) opposition
party for the release of the information, the government
announced on 15 December that, while it would not publish
the names, it would publish a white paper about the HSBC
information.[23]

18. 2015 HSBC leaks
 In February 2015, Indian Express released the list of 1195
Indians account holders and their balances for the year 2006-
07 in HSBC's Geneva branch. The list was obtained by
French newspaper Le Monde and included the names of
several prominent businessmen, diamond traders and
politicians. The number of Indian HSBC clients is roughly
double the 628 names that French authorities gave to the
Indian Government in 2011. Indian government said it will
probe this matter. The balance against the 1195 names stood
at ₹25,420 crore (US$3.8 billion).
 The list which had names of dictators and international
criminals, was simultaneously published by news
organisations in 45 countries including The Guardian, UK;
Haaretz, Israel; BBC, London.[30] HSBC had helped its clients
evade taxes[31] and said in a statement that "standards of due
diligence were significantly lower than today.

19. Consequences of Black Money
 Loss of revenue to the government and running of parallel
economy in country
Black money and corruption form a vicious circle
 Black money effects real capita income and national income
of country
Black money causes decrease in quality of public goods and
services

20. Black money results in higher taxation and inflation
Black money causes difficulty in the formation of
monetary and fiscal policy
Black money results in increased criminal activities

21. Measure to control Black money:
 1. Constitution of SC Monitored SIT on Black Money
 2. Renegotiation of Tax Treaties
 3. The Black Money (Undisclosed Foreign Income and
Assets) and Imposition of Tax Act, 2015 for Foreign Black
Money
 4. Income Declaration Scheme 2016 for unearthing
Domestic Black Money
 5. Penalty on Real Estate Transactions undertaken in
Cash exceeding Rs.20,000/-($297).

22.  6. Tax Collection at Source on Cash Sales exceeding
Rs.2,00,000/- ($2970)
 7. Benami Transaction (Prohibition) (Amendment) Bill
 8. Narendra Modi’s warning to Tax Evaders in his interview
to Times Now Journalist Mr. Arnab Goswami

24. According to tax administrators, GST will help in
curbing domestic black money. “Though it is a
reform for indirect taxes, there are filers who
understate incomes by not reporting each and
every transaction. By doing this, they save excise,
VAT, Octroi etc, and more importantly, are able to
furnish under reporting of their incomes. Since,
GST will have a paper trail which can be accessed
by the income tax department such practices will
discourage generation of black money in the
system,” said an income tax official.

25. Conclusion:
 To conclude, we may say, that it is really a difficult task to
eradicate completely black money which has permeated
every section of society and every sector of economy.
Nevertheless, the measures enlisted above can go a long
way to bring down the black economy to manageable
proposition over a period of time.

26. Thank You