India's position in brics withrespect to black money ( causes, reasons, effects )
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Black money is the money earned but not shown in the accounts for the purpose of tax evasion. Such money can be earned through legal, illegal and extra-legal means. For example, most of the traders and businessmen never reveal their actual incomes, many government doctors are making money by private practice even when they get non-practising allowance or advocates charging much higher fee than shown in their account books, and so forth.
Reasons
Though generation and circulation of black money is a continuous process, there have been quite a few historical reasons for built up of black money in Indian economy. They are as following:Shortages during World War II
During the World War II, many Indian industries found the situation was conducive for black marketing. Supplies of industrial goods from the west were cut off. So, huge profits were made due the short supply. These circumstances formed basis for strong extra-legal economy and tax evasion practices that continued till then.
Faulty Taxation
Defects in the tax structure are also responsible for black money. Till recently, the tax collection mechanism was anti-tax payer and has several flaws. The tax rates were also high and these factors have forced tax payers to look out for ways and means for tax evasion. According to Dr. Jayaprakash Narayan, member of Second Administrative Reforms Commission, tax evasion has become a national pastime in India.
Redundant Control Measures
The controls that were established for regulation of economy during the Nehru era turned out to be excessive within two decades after independence. As the moral authority of political leaders has come down these excessive controls have become raison d'être of wide spread corruption at all levels of administration. Due to such institutionalisation of corruption, the costs of business have gone up and forced every stakeholder to take resort of extra-legal practices that has built a vast informal economy. Black money was one of the fundamental constituents of that economy.
Large Public Expenditure
During the initial decades of independence huge amounts of money was spent on poverty alleviation, subsides, infrastructure development through centralized planning. But the huge spending has neither been efficiently administered nor properly targeted. The result has been leakages into the stream of unaccounted income. Major chunk of black money in India is invested in Real Estate and Share markets as in both these markets capital gains can exceed more than 30% mark. Both are ideal conduits for circulating black incomes
Reasons
Though generation and circulation of black money is a continuous process, there have been quite a few historical reasons for built up of black money in Indian economy. They are as following:Shortages during World War II
During the World War II, many Indian industries found the situation was conducive for black marketing. Supplies of industrial goods from the west were cut off. So, huge profits were made due the short supply. These circumstances formed basis for strong extra-legal economy and tax evasion practices that continued till then.
Faulty Taxation
Defects in the tax structure are also responsible for black money. Till recently, the tax collection mechanism was anti-tax payer and has several flaws. The tax rates were also high and these factors have forced tax payers to look out for ways and means for tax evasion. According to Dr. Jayaprakash Narayan, member of Second Administrative Reforms Commission, tax evasion has become a national pastime in India.
Redundant Control Measures
The controls that were established for regulation of economy during the Nehru era turned out to be excessive within two decades after independence. As the moral authority of political leaders has come down these excessive controls have become raison d'être of wide spread corruption at all levels of administration. Due to such institutionalisation of corruption, the costs of business have gone up and forced every stakeholder to take resort of extra-legal practices that has built a vast informal economy. Black money was one of the fundamental constituents of that economy.
Large Public Expenditure
During the initial decades of independence huge amounts of money was spent on poverty alleviation, subsides, infrastructure development through centralized planning. But the huge spending has neither been efficiently administered nor properly targeted. The result has been leakages into the stream of unaccounted income. Major chunk of black money in India is invested in Real Estate and Share markets as in both these markets capital gains can exceed more than 30% mark. Both are ideal conduits for circulating black incomes
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