Shaklee business
Black money is both an economic and a social problem. In the latter context, it is perceived as a problem with adverse sociological effects on society, like social in qualities, social deprivations, etc. ; in the former context, it is perceived as a parallel economy, an underground economy or an unofficial economy that is the consequence of the countrys economy and nations socialist planning development.Black money is tax-evaded income.
It can be earned both trough legal and illegal means. Its legitimate source is that the income-earners do not reveal their whole income for tax purposes.Its illegitimate source is bribe, smuggling, black-marketing, selling commodities at prices higher than the controlled prices, taking pugree for house, shop, etc. Selling house at a high price but showing it at a much lowers price in the account books, and so forth.Unrealistic Tax LawsThe increase in taxes and duties compel some people to evade them. The present rules (1991) prescribe the limit of Rs.22,000 as a free income for levying income tax. Can a person exist within this limit in this age of inflation.
A mason or a carpenter earns about Rs.60 to Rs.80 pr day in a city and Rs.80 to Rs.100 per day in metropolitan areas. Assuming that these people work for 300 days in a year, their income will exceed the prescribed income tax limit. And how may of these workers pay income tax If income tax rate is reduced, there is more likelihood of hiding less and increasing revenue.Different Rates of Excise DutyWithin similar products, there are different rates of excise duty. For instance, in textiles and cigarettes, this leads to tax evasion through mis-classification of output. In textiles, separate rates of excise are charged for cloth of different varieties.
Manufacturers regularly downgrade a product to pay lower rates of excise. This alone generates Rs.1, 000 crore a year in black money.Control PolicyAnother cause of black money s the price control policy of the government. In selecting commodities for control land in determining their prices, the government fails to take into account the elasticities involved in demand and supply. For example, according to the report of the National Council of Applied Economic Research (NCAER) for the year 1981, black money worth Rs.840 crore was created in the Indian economy over the period of nine years from 1965-66 to 1974-75 as a result of the operation of price controls in six commodities, viz. cement, steel, paper, vanaspati, automobile tyres and fertilizers.Quota SystemYet another source of black money is the quota system.
The import quota, the export quota n and the foreign exchange quota are generally misused by selling them at a premium.ScarcityBlack money is also causedby scarcity and deceptive public distribution system. When essential goods become scarce, people have to paying her than the controlled ;[prices, which generates black money. The scarcity of kerosene oil, sugar, refined oil etc. have always resulted in illegitimate transactions and black money.InflationThe increase in prices of commodities like petrol, etc. in intonation market, increase in prices of commodities due to high increase in duties and taxes imposed by the government, the conspicuous consumption created by the people with unaccountable money, diverting resource from production to speculation all these cause inflation which in turn creates black money.
Affection Society & CountryBesides the economic effects, there are many social consequences of black money also. In economic terms, black money robe the exchequer of its due share, increases economic inequality and hampers programmes of economic development. Socially, it increases social inequality, creates frustrations among honest people, increases crimes like smuggling, bribery, etc. and adversely affects social services programmes for the uplift of the poor and the weaker sections of society. It also distorts the measurement of true rates like growth rate, inflationary rate, unemployment rate, poverty, etc. which in turn affects the government policies for containing these problems.
Measures of ControlOver the past 40 years, the government has at various times announced seven schemes offering opportunities to bring black money overboard. Some of these schemes are: introducing the scheme of special Bearer Bonds, demonesting high denomination currency notes, stringent raids and scheme of voluntary disclosures. In July1991, the Union Finance Minister proposed a new scheme- national Housing Bank Scheme to woo black money back into the legitimate operations of the national economy.
The scheme offers possessors of unaccounted money an opportunity to deposit any amount of money (with a minimum limit of Rs.10, 000) with NHB without disclosing the source of funds.The demonetisations of 1,000 rupee notes in 1978 brought out currency worth Rs.29 crore. Voluntary Disclosure Scheme of 1951,1955 & 1957 yielded Rs.249 crore of disclosed account. The Disclosure Scheme launched in 1986 brought in just Rs.6778 crore. The 1991 scheme is open till March, 31,1992. About 375 raids in 1978 yielded assets worth Rs.217 lakh.Some scholars have maintained that all these measures have touched only the tip of the iceberg. All the schemes have hardly fetched Rs.5,000 crore over a period of forty years.It has been suggested that the problem of black money and parallel economy can be contained by reducing taxes in some areas, giving incentives for voluntary disclosure of income, overhauling the economic intelligence unit, curbing administrative corruption at various level, emptying tax on money spent on house construction, doing away with control policies, and so forth.
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