{"id":54239,"date":"2019-12-20T15:44:00","date_gmt":"2019-12-20T10:14:00","guid":{"rendered":"https:\/\/blogadmin.forumias.com\/?p=54239"},"modified":"2020-02-26T15:46:19","modified_gmt":"2020-02-26T10:16:19","slug":"7-pm-inaccurate-diagnosis-draconian-remedy-on-black-money-20th-december-2019","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/7-pm-inaccurate-diagnosis-draconian-remedy-on-black-money-20th-december-2019\/","title":{"rendered":"7 PM | Inaccurate diagnosis, draconian remedy : On Black Money | 20th December 2019"},"content":{"rendered":"\n<p><strong>Context:\n<\/strong>Black\nmoney and related laws.<\/p>\n\n\n\n<p><strong>Black\nMoney:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>There is no official definition of black\nmoney in economic theory, with several different terms such as parallel\neconomy, black money, black incomes, unaccounted economy, illegal economy and\nirregular economy all being used more or less synonymously. The simplest\ndefinition of black money could possibly be money that is hidden from tax\nauthorities.<\/li><li>Therefore, black money is money earned\nthrough any illegal activity controlled by country regulations. <\/li><li>Black money proceeds are usually\nreceived in cash from underground economic activity and as such are not taxed. <\/li><li>Recipients of black money must hide it,\nspend it only in the&nbsp;underground economy,&nbsp;or attempt to give it the\nappearance of legitimacy through&nbsp;money laundering.<\/li><li>According to the Standing Committee\u2019s\nreport, the sectors that see the highest incidence of black money include real\nestate, mining, pharmaceuticals, pan masala, the gutkha and tobacco industry,\nbullion and commodity markets, the film industry, and educational institutes\nand professionals.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"\"><tbody><tr><td><\/td><\/tr><tr><td><\/td><td>\n \n \n \n \n <strong>Money\n Laundering:<\/strong>\n As per the Financial Action Task\n Force&nbsp;(FATF), Money laundering is the processing of these criminal\n proceeds to disguise their illegal origin. This process is of critical\n importance, as it enables the criminal to enjoy these profits without\n jeopardising their source.Illegal arms sales,\n smuggling, and the activities of organised crime, including for example\n drug trafficking and prostitution rings, can generate huge amounts of\n proceeds.The money from the criminal activity\n is considered dirty, and the process &#8220;launders&#8221; it to make it\n look clean.&nbsp;Money laundering&nbsp;is itself a crime.The process of laundering money\n typically involves three steps: placement, layering, and integration.Placement\n puts the &#8220;dirty money&#8221; into the legitimate financial system.Layering\n conceals the source of the money through a series of transactions and\n bookkeeping tricks.In\n the final step, integration, the now-laundered money is withdrawn from the\n legitimate account to be used for whatever purposes the criminals have in\n mind for it.\n \n \n \n \n \n \n &nbsp;\n \n \n \n \n &nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p><strong>Estimates\nof Black Money in India:<\/strong><\/p>\n\n\n\n<p>As black money\nis not accounted it is not easy to estimate it either. Different reports suggests\ndifferent estimates.&nbsp;Some estimates are as&nbsp;below:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>A former CBI Director of India has said\nthat the total black money in India is around 500 billion US dollars.<\/li><li>Global Financial Integrity Report has\nmentioned that&nbsp;India lost around 120 billion US Dollars in the time frame\nof 2001-2010. It ranked India in 8th spot in black money generation.<\/li><li>Indians\u2019 share in tax-havens across the\nworld&nbsp;is estimated at $152-181 billion (Rs. 10 lakh crore), by one\ncalculation of Bank of Italy. <\/li><li>Between 2008 and 2012, various reports\nquoted anywhere between $500 billion and $1.5 trillion, some relying on\nestimates of a Swiss Bankers Association (SBA) report.<\/li><li>In March 2019, National Institute of\nFinancial Management reported to the Lok Sabha Standing Committee on Finance,\nthat the estimate is about $216 billion-$490 billion.&nbsp;<\/li><\/ul>\n\n\n\n<p><strong>Some\nInstitutions for combating black money:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Central\nBoard of Direct Taxes (CBDT):<\/strong> Under Department of Revenue, Ministry\nof Finance <\/li><li>It\noversees direct tax administration in India and is primarily responsible for\ncombating black money. <\/li><li>A new\npost Director General of Income Tax (Investigation) was created for\ninvestigation of cases of evasion. <\/li><li>DGIT\nheads investigation wing of the Board.<\/li><li>Similarly,\nfor indirect taxes&nbsp;\u2018Central Board of Excise and Customs\u2019&nbsp;is in place\nand it has Directorate General of Central Excise Intelligence (DGCEI).<\/li><li><strong>Enforcement\nDirectorate: <\/strong><\/li><li>The\nED has currently been entrusted with the investigation and prosecution of\nmoney-laundering offences and attachment\/confiscation of the proceeds of crime\nunder the Prevention of Money Laundering Act. <\/li><li>It\nalso enforces provisions of Foreign Exchange Management Act.<\/li><li><strong>Financial\nIntelligence Unit:<\/strong>&nbsp;<\/li><li>It\nwas established in 2004 for coordinating and strengthening efforts for\n\u2018national and international intelligence\u2019 by investigation and enforcement\nagencies in \u2018combating money laundering and terrorist financing\u2019. <\/li><li>FIU\nis the national agency responsible for receiving, processing, analyzing, and\ndisseminating information relating to suspect financial transactions.<\/li><li>It is\nan independent body reporting to the Economic Intelligence Council headed by\nthe Finance Minister. <\/li><li>For\nadministrative purposes, the FIU-IND is under the control of the Department of\nRevenue, Ministry of Finance. Its functions are defined under Prevention of\nmoney Laundering Act.<\/li><\/ul>\n\n\n\n<p><strong>Laws\nto combat menace of black money:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>The\nIncome Tax Act, 1961:<\/strong><\/li><li>The\nIncome Tax Act was enacted in the year 1961 and is the statute under which\neverything related to taxation is listed. This includes levy, collection,\nadministration and recovery of income tax. The act basically aims to\nconsolidate and amend the rules related to taxation in the country.<\/li><li>The\nIncome Tax Act has, since 1989, provided for up to three times penalty on\nescaped tax. Similarly, wilful attempts to evade taxes have, since 1975, been\npunishable with imprisonment of up to seven years.&nbsp;<\/li><li><strong>Protocol\nWith Switzerland: <\/strong>A protocol for automatic exchange tax\ninformation, under which India is now receiving data from Switzerland, was\nsigned in 2011, as was the amendment requiring all citizens to disclose foreign\nassets with their domestic tax returns.<\/li><li><strong>Black\nMoney Act:<\/strong><\/li><li>The\nBlack Money (Undisclosed Foreign Incomeand Assets) and Imposition of Tax Act,\n2015 is more commonly called as Black Money Act.<\/li><li>It\ncame into force on 1 April 2016 and will cover Indian residents. <\/li><li>It\napplies to undisclosed foreign income and assets, including financial interest\nin any entity. <\/li><li>The\nAct does not distinguish between the owner of the asset and beneficial owner of\nthe asset. <\/li><li>Respite\nfrom penalty and prosecution has been given to bank accounts with up to INR\n500,000<\/li><li>Undisclosed\nforeign income and fair value of undisclosed foreign assets will be taxed in\nIndia at a flat rate of 30%, with no deductions, exemptions or set-off of\ncarried forward losses available under the existing Indian direct tax laws.<\/li><li><strong>Flaws in the act:<\/strong><\/li><li>Lawmakers\noverestimated the writ of international laws and made no economically\npersuasive case. <\/li><li>Resultantly,\nas of May 2019, the total untaxed foreign assets mined was \u20b912,500 crore. <\/li><li>Wholly\nrecovered, this wouldn\u2019t even pay Prasar Bharati\u2019s bills for four years.&nbsp;<\/li><li><strong>Fugitive\nEconomic Offenders Act, 2018<\/strong> <\/li><li>It has\nbeen enacted for effective action against economic offenders fleeing Indian\njurisdiction. <\/li><li>An FEO is a person against whom an arrest warrant\nhas been issued for committing any offence listed in the Schedule to the Bill,\nand the value of the offence is at least Rs 100 crore.&nbsp; <\/li><li>Further, the person has left the country and\nrefuses to return, in order to avoid facing prosecution.&nbsp; <\/li><li>The Bill lists 55 economic offences in the\nSchedule, which include: <\/li><\/ul>\n\n\n\n<p>(i) counterfeiting government stamps or currency,\n<\/p>\n\n\n\n<p>(ii) dishonouring cheques, <\/p>\n\n\n\n<p>(iii) benami transactions, <\/p>\n\n\n\n<p>(iv) transactions defrauding creditors, <\/p>\n\n\n\n<p>(v) tax evasion, and <\/p>\n\n\n\n<p>(vi) money-laundering.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>It\nprovides for attachment and confiscation of property of fugitive economic\noffenders and disentitles them from defending any civil claim.<\/li><li><strong>Flaws in the act:<\/strong><\/li><li>Under the Act, any court or tribunal may bar an\nFEO or an associated company from filing or defending civil claims before it.\n&nbsp;Barring these persons from filing or defending civil claims may violate\nArticle 21 of the Constitution i.e. the right to life.&nbsp; Article 21 has\nbeen interpreted to include the right to access justice.<\/li><li>Under the Act, an FEO\u2019s property may be\nconfiscated and vested in the central government.&nbsp; It allows the Special\nCourt to exempt properties where certain persons may have an interest in such\nproperty (e.g., secured creditors).&nbsp; However, it does not specify whether\nthe central government will share sale proceeds with any other claimants who do\nnot have such an interest (e.g., unsecured creditors).&nbsp;<\/li><\/ul>\n\n\n\n<p><strong>Issues\nwith the existing laws:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The laws made post 2014 to curb black\nmoney have many flaws. Some of the them listed below:<ul><li>The retrospective application of tax and\npenal laws that are so confiscatory and discriminatory that they walk all over\na citizen\u2019s right to life, carry on business and own property. <\/li><\/ul><ul><li>These laws also shift the burden of proof\nonto the citizen to establish that he is not an offender. <\/li><\/ul><ul><li>Citizens can be subjected to criminal\ntrial, without the taxman first proving that there has been tax evasion. The\nresults of giving such unbridled powers to agencies have been disastrous.<\/li><\/ul><\/li><\/ul>\n\n\n\n<p><strong>Conclusion:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>India needs a rationalized tax\nstructure. Prof. Kaldor, Wanchoo Committee and many others including the\nauthors of the&nbsp;National Institute of Public Finance and Policy (NIPFP)\nReport&nbsp;have recommended a reduction in marginal tax rates, simplification of\ntax structure, taxation laws and improvements in tax administration.<\/li><li>The Wanchoo Committee also recommended\nthat the department should completely reorient itself to a more vigorous\nprosecution policy in order to instill a wholesome respect for the tax-laws in\nthe minds of the taxpayers.<\/li><li>Arousing Public Conscience: A special\ndrive should be undertaken to arouse public conscience by enhancing the\nco-operation of the leaders in various walks of life.<\/li><li>Increased international cooperation,\ntechnological advances and banking penetration implodes black money more than\nany law or sermon on patriotism. <\/li><li>India\u2019s war on black money can only be\nwon through democratic, persuasive and economically-sound means.<\/li><\/ul>\n\n\n\n<p><strong>Source:\n<\/strong><a href=\"https:\/\/www.thehindu.com\/opinion\/op-ed\/inaccurate-diagnosis-draconian-remedy\/article30351692.ece\">https:\/\/www.thehindu.com\/opinion\/op-ed\/inaccurate-diagnosis-draconian-remedy\/article30351692.ece<\/a><strong><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Context: Black money and related laws. Black Money: There is no official definition of black money in economic theory, with several different terms such as parallel economy, black money, black incomes, unaccounted economy, illegal economy and irregular economy all being used more or less synonymously. The simplest definition of black money could possibly be money&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/7-pm-inaccurate-diagnosis-draconian-remedy-on-black-money-20th-december-2019\/\">Continue reading <span class=\"screen-reader-text\">7 PM | Inaccurate diagnosis, draconian remedy : On Black Money | 20th December 2019<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[130,955,9],"tags":[],"class_list":["post-54239","post","type-post","status-publish","format-standard","hentry","category-7-pm","category-7-pm-brief-infograph","category-public","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/54239","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=54239"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/54239\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=54239"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=54239"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=54239"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}