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Why Black Money is ‘Bad’?

We have been trying to find colour in this bicolored black and white world. When it comes to the colour of money, it gets more covert and enthralling. We have been hearing about lakhs and thousands of crores of “black money” being amassed away in “benaam” bank accounts, “chupa rustam” lockers, tax havens and even in big boots of imported bravura cars of loaded businessmen, corrupt officials, mafias and some “honest” politicians. So what does this term “Black Money” or “Kala Dhan” which we habitually hear our society use for anyone who lives a lavish lifestyle actually mean?

Where does it come from? Where can it be used?

As Wikipedia suggests, “Black money refers to funds earned on the black market, on which income and other taxes have not been paid.” Sounds tricky, right?

I believe the easiest definition of black money is income that has escaped taxed. There is an opinion that black money is “bad boys’ money”; damaging for the state and life threatening for the economy. Not really. In the principal place, we need to understand the meaning of black money.

“Black money is justified as money earned on which no taxes is paid to the government.”

In other words, this is money that has been generated by delivering goods or services and being paid in return. The real problem is that the goods or services delivered for black money are usually not legal, and therefore the income that is forthcoming with it is bound not to be disclosed. In the Indian subcontinent, ‘Black Money’ is considered both an economic as well as a social problem. In the former scenario, it is perceived as a parallel economy, underground economy or an unofficial and unregulated economy. In India, it is widely referred to as a “Cash Economy”.

It is assumed to be a pronounced hindrance in the development of the nation and simply has harsh, damaging effects on the economy of the motherland. Taking the latter scenario into account, it is studied as the root cause for social disparity, income inequality and not to forget, the ever growing “terrorism” which seems to be only funded by black money. The money that is not regulated bound to create havoc in the economy and fear of uncertainty.

As it has always been said, “A delinquent like poverty, only affects the poor, unemployment affects those who are unemployed, alcoholism and drug abuse affect those who devour them, black money is a hitch which does not affect persons who amass ‘black dough’ but it affects the common man in the populace.” Hence, it has been described as a problem with a distinction. Such money is earned both through legal and illegal means. In India, the tradition of bribery is a necessary evil, with people themselves contributing to this ‘noble’ cause.

“Rishwat” is nothing new to an economy where historically the practice of giving and taking bribes is evident from the age-old adage, “You scratch my back, I scratch yours”.

The citizenries are, by and large, the prime location from where the illegal money gets generated. Establishments of all sizes religiously demonstrate the aforementioned adage, whether small-time sole proprietors, a small or medium enterprise owners or established corporations. They all find it easier to dole out money to get their job done in a swish. Everyone loves taking ‘ShortKuts’.

So the question arises, who takes home this “ShortKut” money? The answer seems to be simple. It’s all of us. The recipients include a few politicians, “afsars” at all levels, corrupt administrators, and most government departments and all of us too. The private sector is not excluded either.

“Corruption is all pervasive in the Indian system of governance and business.” In addition to bribery, other illegitimate sources include trafficking, black marketing, peddling commodities at prices higher than the controlled prices, taking “pugree” for the house, shop, etc., selling a house at an exceptionally high price but showing it at a much lower price in the account books, and so on. The next question we must ask is, where does the delinquent take birth legitimately? Its legitimate birthplace is when the income earners do not divulge their full income for tax purposes.

Examples include manufacturers producing goods without paying indirect taxes such as Excise and VAT, leading to cash sales. Some government doctors earning money through private practice even when they get a non-practicing allowance, teachers making money through private tuitions, examinations and book royalty and not including it in income tax returns, consultants charging exorbitant fees more than is shown in their books of accounts, and so forth and so on.

Once taken what to do next with the money is the question that stings felonious minds! Once a bribe is espoused, a beneficiary cannot reveal this income as it is illegal, but it is still an income. So what do we do now? This wealth will now flow into a parallel economy through a mixture of networks and breed further income downstream. The delinquency is that the government is left out of this money rotation as it does not earn any income, but the economy benefits as the money continues to travel, spawning wealth as it passes fingers.

The above excerpt is from The Black White & Grey written by Pragun A. Jindal and published by Money Worries. The book aims to create awareness about black money and its ill effects. You can purchase the book here.

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