Essay on Measures to Control Black Money – The problem of ‘black money’ has to be tackled in a realistic and at the same time intelligent manner. Since it is not a problem with the poor but with the well off people, it should be handled carefully. The following measures will be of some help in controlling, if not eliminating, this problem.
1. More than any other thing, the standards of public morality must be raised. In this regard, politicians, ministers, senior civil servants, intellectuals and the media people must play an important role. They must set up an example for others to emulate by paying taxes properly.
2. Public expenditure must come down and there must be stringent monitoring of expenditure, especially of public sector projects.
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3. There must be much more effective supervision of private sector investment expenditures, particularly where there is greater reliance on development finance institutions and banks.
4. Tax system must be realistic. Unduly high rates of tax are counter-productive. It would lead to tax evasion — whether it is income tax, wealth tax, capital gains tax or transfer tax on real estate — and at a later stage creating black money.
5. Price controls should be done away with. Exchange rates should be realistic reflecting our comparative prices and competitive position in the world economy.
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6. Tax collection machinery must be made more efficient than what it is now. Honest officials in this department must be profusely rewarded.
7. Attractive incentives must be given for voluntary disclosures of income [VDS].
8. A thorough overhauling of the economic intelligence unit must be made. Trusted officials must be recruited for this department.
9. Administrative corruption at different levels must be stopped.
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10. Exempting tax on money spent on house construction may help mostly middle class salaried people who are normally made to pay taxes without fail.
With regard to this problem the harsh truth is that the government policies are the biggest sources of black money generation. Hence, the government must take extra-precaution in framing its policies to give no scope for black money.