10 sources of Black Money

It is indeed heartening that somehow many of localcircles inputs make to Govt policy and schemes and last years notebandi was discussed by us before the PM announced the same. I want to illustrate 10 causes of black money in India 1.Real estate: Due to rising prices of real estate, the tax incidence applicable on real estate transactions in the form of stamp duty and capital gains tax can create incentives for tax evasion through under-reporting of transaction price. 2.Bullion and jewellery market: The purchase allows the buyer the option of converting black money into gold and bullion, while it gives the trader the option of keeping his unaccounted wealth in the form of stock, not disclosed in the books or valued at less than market price. 3.Financial markets transactions: IPO manipulations, rigging of market such as use of shell companies. 4.Public procurement: Public procurement has grown phenomenally over the years – in volume, scale, and variety as well as complexity. The Competition Commission of India had estimated total public procurement figure for India at around 10 to 11 lakh crore per year and provides ample scope of corruption due to rigged procurement process. 5.Non-profit organizations: Taxation laws allow certain privileges and incentives for promoting charitable activities which are misused and manipulated. Highlighted by FATF as well. Used to park funds of corrupt politicians and businessmen. 6.Informal Sector and Cash Economy: Cash transactions, large un-banked and under-banked areas contribute to the large cash economy in India. 7.Trade-based Money Laundering (TBML): Disguising the proceeds of crime and moving value through the use of trade transactions in an attempt at legitimizing their illicit origins. 8.Tax Havens: Tax havens are typically small countries/ jurisdictions, with low or nil taxation for foreigners who decide to come and settle there. Strong confidentiality or secrecy regarding wealth and accounts, very liberal regulatory environment and allow opaque existence, where an entity can easily be set up without indulging in any meaningful commercial activity and yet claim to be a genuine business unit, merely by getting itself incorporated or registered in that jurisdiction. This makes them highly desirable locations for multinational entities wishing to reduce their global tax liabilities. Multinational entities consisting of a network of several corporate and non-corporate bodies set up conduit companies in tax havens and artificially transfer their income to such conduit companies in view of the low tax regime there. 9.Investment through Innovative Derivative Instruments: Such as Participatory Notes (P-notes). 10.Hawala: It is an informal and cheap method of transferring money from one place without using banks etc. It operates on codes and contacts and no paperwork and disclosure is required.