The Bangalore Metro Reporter
HOW MUCH BLACK MONEY IS IN INDIA?
Baba Ramdev is demanding bringing back black money stashed in foreign countries. He estimates the black money abroad at Rs. Twenty Lakh crores! It is true that there are a lot of black money in foreign banks belonging to top politicians, bureaucrats and businessmen, but, this group constitutes not even 0.5 percentage of the country’s population.
Bringing black money stashed abroad is fine, but what about the black money that is very much in India? Except those who could afford to go abroad and deposit their ill gotten wealth in foreign countries, nobody can even imagine stashing their ill-gotten money abroad. And the hard fact is that most of the ill gotten money is very much in India only.
Ill gotten money has many dimensions. The first category consists of politicians and bureaucrats who make crores through corruption. The second category consists of businessmen and corporate houses who devise ways and means to amass wealth and cheating the government of its legitimate tax. The third category consists of people who avoid paying income and other taxes.
The politicians and bureaucrats have made lakhs of crores through corruption. Politics has become a highly lucrative commercial venture to make a fortune that can last for generations. Of late, the thin line separating politicians and bureaucrats has also vanished. It is a well known fact that people who were hard put to meet both ends, have become millionaires after getting elected as MLAs, MPs etc. In our own state, there are myriads of such examples.
Bureaucracy also is neck deep involved in corruption. Few months back, the CBI had unearthed ill gotten wealth of more than 250 crores from an IAS couple in North! In our state too, there are enough examples of KAS officers amassing wealth in hundred of crores illegally.
Some of these corrupt officials have even taken to politics.
If one were to take a rough calculation of the loot by the politicians and bureaucrats, the figure will shock everybody. It is in the range of lakhs of crores, many times over the national wealth. It is another matter that a small percentage of the loot might have gone to foreign countries. But, the rest remains here. The money has not gone anywhere, but, is very much in India. The lakhs of crores of rupees, are invested in real estate, gold, shares etc. As such it is easy for the government to devise proper approach to detect and confiscate these investments. If the government can detect and confiscate even 10% of such investments, there will be no need for fresh taxes in the budget for the next years!
There is another category of people, who as a rule, avoid payment of taxes to the government be it Income Tax or Sales Tax or even Customs duty in their transactions. It is an open secret that majority of the real estate transactions are undervalued to avoid payment of proper stamp duties. People always tend to register the deed at government’s guidelines value which is at least 50% less than the market value. In fact, the government has not brought in a scientific approach to determine the market value of properties. Even to this day, not a single case of proven cheating of proper stamp duty has resulted in conviction. Every day, thousands of crores of rupees change hands through real estate and what is accounted is a negligible amount proportionately. From this only, one can imagine the quantity of black money generated.
This phenomenon of accumulation of black money in real estate can be illustrated with a simple example. In Bangalore, the registration department collects about 3,000 crores as stamp duty and registration fee through registration of deeds in a year. The stamp duty is 5% and the Registration fee is one percent. This means that transactions in white are around 50,000 crores. But the real transaction will be in manifolds to this amount implying lakhs of crores of black money from real estate itself. Further, if this be the case in Bangalore, then what about the generation of black money in Mumbai, New Delhi, Chennai, Kolkata and other cities of India? It is better to leave the volume to the calculative skills of the readers. One can bet for at least Rs. 15 to 20 lakh crores of black money generated in real estate itself in the country every year!
With regard to the evasion of sales tax and Excise/Custom duty, it is a well known fact that major chunk of retail business is done without paying tax. It is beneficial to both trader and the consumer. With the sales tax, that is VAT as high as 14.5%, consumers will benefit if they purchase without bill and the trader can escape the payment of tax to the government.
Whatsoever, the black money generated in India continues to be in India through investments in real estate, bullion trading, stock market etc. It is in this area the government should set a machinery to detect the black money and collect the taxes. In fact, the black money in the market is many times the annual budget of the central government and total budget of all the states.
It is this area that the likes of Baba Ramdev need to introspect and fight for.
That is all.
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