Posted in Finance Articles, Total Reads: 3514
, Published on 25 June 2011
Economic growth in various countries has a cascading effect on the overall progress of a country. Manufacturing, industrial growth, employment and prosperity of the citizens all form a part of the developmental cycle. Economic development leads progress of the nation by having good infrastructure, facilities, services, lesser tax and higher income for the people. However, even in developing countries and emerging economies there is one aspect which is deteriorating progress and eroding the economy by the minute- Black Money.
Black money is defined as the money which is unaccounted for or which has been accumulated by tax evasion or by illegal means like piracy. It is the money earned as a part of transactions in the black market or black money, and it has a negative effective on economic growth and hampers the progress of a country. Thus, it becomes critical to put a curb on black money and use it for developmental purposes by the government.
Some effective steps which can be undertaken by the Government to curb the illicit wealth and use it for the progress of the nation are mentioned below:
Amending the tax system-
The biggest reason for people accumulating black money is because they want to avoid the high taxes that are imposed on the citizens. The payment of their hard earned money in the form of taxes and still not getting necessary benefits irritates the tax payers, and they choose not to pay taxes. The tax system encourages evasion despite reducing the tax rates considerably. The cascading effect of multiple taxes and higher indirect tax rates hurt the people. Implementation of Direct Tax code would reduce rate of corporate and income tax while abolishing exemptions. This would considerably reduce the formation of more black money
International agreements to punish tax evaders-
Most of the people who avoid taxation or accumulate wealth through illegal means, store their money in foreign banks abroad. Thus, the Government should be proactive in tackling this issue by signing bilateral international tax treaties and given severe punishment to all those who are found guilty.
Revamp election funding-
Political parties use a lot of their illicit wealth during the election campaigns. Strict rules should be laid down by the election commission to force the candidates to declare all their assets and liabilities with their source, and in case traces of black money are found, candidates should be barred from contesting elections.
Reforms in real estate and abolishing stamp duty-
Malpractices in land deals are one of the major sources of generating black money. Difference in actual rates and market rates often leads to ambiguity in land deals. Evasion of stamp duty also leads to creation of illegal wealth. Hence, it is important to take stern steps in making changes in land dealings.
Punishing the guilty by an autonomous body-
Strict punishment must be given to all those who are found guilty who are involved in illegal activities like drugs, dealing in arms, copyright violations or other activities which hamper a country's progress. The investigations must be carried out by an autonomous body without any political influence and those found guilty must be severely punished.
Abolishing black money is a herculean task as it is continuous process without a one-time solution. Systematic implementation of policies for curbing black money on a large scale is one the ways by which this cancer which makes the country hollow can be removed.
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