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BLACK MONEY & PARALLEL ECONOMY
By K.SHEKHAR
BLACK MONEY
Black money may be defined as the money that is generated by activities that are kept secret in the sense that these are not reported to the authorities. As this money is also not accounted to the fiscal authorities i.e. the taxes are not paid on this money.
White money is that money which is shown in relevant accounts and tax paid ,if due
PARALLEL ECONOMY
It connotes the functioning of an unsanctioned sector in the economy whose objectives run parallel , rather in contradiction with the aroused social objectives. This is variously termed as “black economy” , “unaccounted economy”, “illegal economy”, “unsanctioned economy” or “subterranean economy”
SOURCES OF GENERATION OF BLACK MONEY Beginning of the evil Control and licensing system Tax structure Donation to political parties Ineffective enforcement of tax
laws Generation of black money in
the public sector
IMPACT OF BLACK MONEY
1. Leads to misdirection of precious national resources
2. Worsened income distribution3. Big sized unreported segment
of the economy4. Transfer of funds from India to
foreign countries
BLACK MONEY : CANCEROUS GROWTH WITHIN GLOBAL ECONOMY
IMPACT OF BLACK MONEY (contd.)5. New black money culture in
business world6. Corruption in the society
Last but not the least…….7. Corruption of the entire political
scenario
IMPACT OF PARALLEL ECONOMY IN INDIAN CONDITIONS (facts) 2009 Indira Gandhi Institute of
Development Research (IGIDR) Indian economy grew by 5.8% Finance , insurance & real
estate expanded by 9.5% Total amount of black money in
India is Rs.3,54,000 crores Food subsidy is supposed to rise
by a mere 6.2%
Union Budget 2005-06:the Black Economy Introduction of two schemes in
Union Budget 2005- 06 – 1. Banking Transaction Tax (BTT) 2. Fringe benefit Tax (FBT) The value added tax (VAT) has
also been billed as a scheme to tackle black income generation in indirect taxes. It is supposed to lead to better compliance.
Services tax collection has shown high buoyancy. Many more services are progressively being brought under the net of this tax.
Model of Black Income Generation in Legal Activities Profit (P) = Revenue (R) – Cost (C) …(1)
Profit may be white (what is declared) or black (what is not declared). The declared profit appears in the income statement of the business and is called the balance sheet profit. The undeclared profit or black profit is called off-balance sheet profit.It accrues directly to the management of the business.
P = White Profit (Pw) + Black Profit ( Pb) …(2)
Further, P = Actual R – Actual C …(3)
Black Profit (Pb) is generated by declaring lower revenue and/ or overstating costs.
Some questions to ponder upon?? Is black economy really an evil? Is there a way to estimate and curb
the black economy? Are we as individuals also responsible
in contributing in growth of parallel / black economy
How is the government going to tackle the twin and interrelated problem of black economy and unemployment?
EXAMPLES OF PARALLEL ECONOMY Hawala kanda Film industry Illegal export and import Election polls Sports
CAN WE CHECK IT ???.....1. Setting up invigilation & business
department2. Banning unorganized banking
system3. Outwitting of shrewd beaurocrat &
businessmen by government agencies4. Public sector’s participation must be
encouraged in all sectors of economy5. Effective measures to tackle inflation
must be taken
SOME LINKS/ REFERENCES
http://www.financialexpress.com/news/story/126853/
http://in.biz.yahoo.com/050312/32/2k54q.html
www.google.com www.swissbank.ac.in www.blackeconomy.com My friends and colleagues
Money…hai to honey hai….