This article is not structured, just random thoughts and examples on black money to understand.
Let us assume,you are a salaried employee staying in a rent house, you paid tax on you salary and then you paid your house rent sincerely.. every month using cash, but your house owner never paid income tax... on that...rent income...! So he saved 10 to 30% excess money by avoiding tax... now he doesn't sit quiet.... he will go and purchase another house.
What is the problem for you& me when owner purchase another house..?
Now You want to buy a house...you saved 100₹ (If suppose a house cost in market is 100₹... ), now you are ready to buy...but your house owner go and say... I will give 120₹, sell to me... he may offer even 130₹.. ( as he saved 30₹ etc by avoiding tax), House cost increased 20-30₹ artificially without adding any additional facilities to the house.
In the same way people do with other commodities like land, gold and forex
Some people even store this kind of black money by purchasing ForEx USdollers, If you want to go to foreign you buy dollars by paying 65₹ for each dollar , but because of the people who have this easy money... are ready to pay even more (say 70₹) for 1$ dollar. So dollar price go high.
What are the problems If dollar price go high... ?
You were importing 1 Ltd petrol by paying 1 dollar (65₹) now you may have to pay more 70 or 75 ₹ for the same one ltr petrol
Petrol prices go high... if petrol price go high automatically all other prices go high
Not only people who saved black money ( Taxable income for which Tax Not Paid )...! People who got easy money ( by corruption... or by printing fake notes) are also purchasing properties at higher rates.. prices will go high..! or they may be use this money for anti social activities like terrorism or free gifts & liquor at election time to buy votes.
As a result of this..you and me can't offer them ( gold, house, land) or you have to pay more than the actual cost. This is why black money and corruption is not good for the economy.
But Is this demonetisation alone eradicate black money from system?
Answer is No, This will only make the Black money saved in the form of currency notes useless, but people who purchased gold, land properties using that easy money and black money will still be in the system... we need to take actions to bring back that money too.
Regards
Suman D
15-December-2016
Let us assume,you are a salaried employee staying in a rent house, you paid tax on you salary and then you paid your house rent sincerely.. every month using cash, but your house owner never paid income tax... on that...rent income...! So he saved 10 to 30% excess money by avoiding tax... now he doesn't sit quiet.... he will go and purchase another house.
What is the problem for you& me when owner purchase another house..?
Now You want to buy a house...you saved 100₹ (If suppose a house cost in market is 100₹... ), now you are ready to buy...but your house owner go and say... I will give 120₹, sell to me... he may offer even 130₹.. ( as he saved 30₹ etc by avoiding tax), House cost increased 20-30₹ artificially without adding any additional facilities to the house.
In the same way people do with other commodities like land, gold and forex
Some people even store this kind of black money by purchasing ForEx USdollers, If you want to go to foreign you buy dollars by paying 65₹ for each dollar , but because of the people who have this easy money... are ready to pay even more (say 70₹) for 1$ dollar. So dollar price go high.
What are the problems If dollar price go high... ?
You were importing 1 Ltd petrol by paying 1 dollar (65₹) now you may have to pay more 70 or 75 ₹ for the same one ltr petrol
Petrol prices go high... if petrol price go high automatically all other prices go high
Not only people who saved black money ( Taxable income for which Tax Not Paid )...! People who got easy money ( by corruption... or by printing fake notes) are also purchasing properties at higher rates.. prices will go high..! or they may be use this money for anti social activities like terrorism or free gifts & liquor at election time to buy votes.
As a result of this..you and me can't offer them ( gold, house, land) or you have to pay more than the actual cost. This is why black money and corruption is not good for the economy.
But Is this demonetisation alone eradicate black money from system?
Answer is No, This will only make the Black money saved in the form of currency notes useless, but people who purchased gold, land properties using that easy money and black money will still be in the system... we need to take actions to bring back that money too.
Regards
Suman D
15-December-2016
