Except earnings from criminal activities, gun-running and laundering, there is virtually nothing that a citizen earns or spends which is ‘black'. The money is as pure as pure can be. The country needs to simplify the definition
It is a ghost that is neither seen nor does it leave. What is black moneyIJ Nobody really knows. How much is the black economyIJ Again, there is nothing to guess.
Who creates black moneyIJ There are two answers. The taxman says the tax evaders do. The business class or tax evaders believe that there is nothing like black economy — rules and law create it. Both are correct.
The country, ruled by the legacies of British bureaucracy, still interprets the law and customs as per the earlier legacies. This gives them clout and also the power to be less honest.
Often, the nation, more so since 1991, has taken pride in being a liberalised economy. It also sees that post-liberalisation, in many cases, harassment of citizens, particularly those into businesses, have increased.
Another major flaw of a liberalised economy is to rout every transaction through structured bank routes. It has only led to the banks losing over Rs240 lakh crore of public money. As per official records, Rs70,000 crore has been gobbled up by large houses.
No official organisation including the Reserve Bank of India talks about it. Bureaucrat-led Governments, which control a major part of the banking sector, talk in terms of re-capitilising the banks as per the so-called ‘Basel norms’. It means people’s money is pumped into losing banks, people lose the money and the banks continue their misdemeanour.
Most Finance Ministers do not treat it as a malaise. Are not the beneficiaries of banks’ largesse generating black moneyIJ Again, nobody gets an answer to it.
It has been made a complex issue because for over 60 years, Governments have not acted where they could have. A new Government with a new outlook has come. let it do a quick audit of how much has been lost by banks and financial institutions during the last 30 years, including the various stock scams. The new Government should also initiate steps to recover that money.
The recent bribery incident allegedly involving the Syndicate Bank chief indicates that bankers are
hand-in-glove with their clients in squandering away public money for small personal gains. That foreign banks, particularly those operating from Switzerland, are no saints, is a known fact to the world. Would various international treaties for exchange of information to check tax evasion be effectiveIJ Possibly, it would generate more ways to evade the various taxes.
So, should we have a re-look at taxes and other rulesIJ In the post-liberalised era, the country is faced with a plethora of new rules and laws. There are green laws, red laws, laws not to allow industries to function, refusal of industrial licences in places like Delhi, banks’ bid to engulf all businesses and punish who do not and so many other hassles. Even trade houses, for fear of being harassed by officials, not the Government, do not open up with all their grievances — lest their basic functions are affected.
Many businesses in Delhi run without licences because no industrial licence is issued. It props up avenues for the officials to fill their kitty and businesses to fudge their accounts. (In real terms, officials earn black and businesses save their skin to earn a livelihood).
The issue is complex. The courts have a limited role in the adherence of rules. Some initiative has to come at the political level for a pragmatic approach to strengthen and ease the economic process.
A basic flaw in all the rules is the ignoring of the reality of cash economy. It is the strength of Indian economy. It keeps non-payments to the minimum. Word-of-mouth is more trusted than a sheaf of papers.
The kisans, intermediaries, cold storages, mandi samitis, retailers, wholesalers and various others in different kinds of markets prefer cash transactions. It has its own strength and level of trust. Unlike a cheque, nothing bounces here.
It has its problems in terms of tax authorities. There is a plethora of them from the panchayats to every subsequent level. It is just not the issue of uniform Goods and Services Tax or the Direct Tax Code, which have their own problems. Every State has a number of taxes or tolls. Each of these adds to business cost and finally the selling price.
The British-laid colonial tax system was created to hamper the Indian business. Income-tax code is a relic of that era. It puts every economic activity on leash. It does not recognise most of the cash economy, which is over 90 per cent of the total economy.
Since World War II, black money has generated enough debate but little solution. Prime Minister Narendra Modi is open to ideas. The nation needs to look at these issues with a new vision. Except earnings from criminal activities, gun-running, laundering, virtually there is nothing that a citizen earns or spends which is ‘black’. The money is pure. We need to simplify that definition (of course to the chagrin of officials, who thrive on it.)