Black money in layman terms is money earned by an individual in the black market, on which taxes have not been paid and is thus, illegal. While some reports claim that there is a total of US$1.06 trillion held illegally in the Swiss banks, the actual amount of black money deposited in foreign banks is still unknown. In a bid to curb the creation and flow of black money into the Indian economy, Prime Minister Narendra Modi demonetised Rs 500 and Rs 1000 notes from midnight of November 8, 2016. While experts feel that this is indeed a masterstroke by Modi, and will help stem the creation of black money, only 6 percent of the black money in India is held in cash. Those holding it will still find ingenious ways to launder their money in the 50-day window that the government has provided, before the existing series of Rs 500 and Rs 1,000 notes are completely purged from the system. While there have been no reports of the rich with black money committing suicide or dying of heart attack after the notes ban, it is the poor and middle class citizens who are most inconvenienced. They are struggling with the difficulty caused by the move. Three people have collapsed and died in the last 4 days after standing in long queues at the bank and ATM, waiting to draw money. Separately, a death has been reported at Pali, Rajasthan of a 1-year old child, because the ambulance refused to take Rs 500 denomination. The Google Search Engine is wrought with the question, “How to convert black money into white”. And the sad part is the black money holders will surely find ways and means to convert it into white. Here are a few ways that the Government should be on the lookout for, which will be used to turn black money into legal, white money:
The Agricultural Sector
Using the 50-day window, the deep pockets will start depositing the black money in PSUs in the rural areas. The farmers will claim that they received the 500 and 1000 currency notes in the ‘Mandi’, and the black money launderers will return with legal currency. Yes, the agricultural income is going to see a boom this year, but it will do so in the process of helping black money turn to white.
The Money Mules
The poor, friends and relatives will be acting as money mules for the black money hoarders. The Government has stated that they will not question any deposit up to an amount of 2.5 lakh. These money mules will be given the said amount, who, in turn, will deposit it in their bank accounts and then withdraw it again. But this time wholly white and legal, at a certain pre-fixed price.
Loans to the Poor Without Interest
Of late, the poor have never been in greater demand in the country. The black money holders will defeat the purpose of demonetisation by extending interest-free loans to the poor. Black money holders will also try and issue bogus loans to relatives and friends and take a cheque in return, which means an easy transition from black into white.
Trust and Charity
Bogus trusts for social causes will be formulated with members who will include relatives, cooks and drivers. While on paper it will show as charity, the money fed into the trusts will just be a means to convert black money to white.
Income From a Profession
Many black money hoarders are going to use this means. They will project the hard black cash on them as income from tuition, commission or any other professional fees.
Use of Jewellers
The black money will be given to jewellers in return for a cheque converting black money to white and a purchasing bill stating that the cheque is in lieu of personal jewellery sold at the shop. Practices such as purchase of gold at premium rates and pre-dated transaction have been trending since the demonetisation. However, the jewellers in such cases will be in a spot of bother as the government has asked top jewellers to give details of gold transactions after the demonetisation.
Donations to Political Parties and Temples
Money will be donated to temples and political parties. While temples can show the income as anonymous contribution, the political parties can collect donations of Rs 20,000 or less without having to reveal who donated the money, let alone their income tax PAN number. The ways and means of turning black money to white are indeed innumerable. Reports have also come in from Mumbai and Assam that Rs 1000 currency notes are being sold at a price ranging between Rs 300 to Rs 700. Other options which can turn black money to white include booking and cancelling train tickets, using money laundering firms, paying salaries in advance, approaching the banknote mafia which has emerged overnight to make the most of the situation, and many more. The list is endless. Separately, many of the black money holders will use their power of position to get things done, or come up with inane excuses to badger the government.
The government needs to keep a hawk-eye vigil on corrupt and defaulter citizens in this 50-day window. It has to think out of the box, as a black money holder would, and take measures to nip the process of converting black money to white at the very bud. Otherwise the very purpose of the demonetisation of the currency notes will fail; with the poor paying a heavy price, and the rich with black money still enjoying every penny of it!