How to tackle Black Money

R. Viswanathan published an informative article on ways to tackle black money in The Hindu BusinessLine

How black money is generated?
All forms of corruption involve generation of black money.It is generated even in legitimate transactions, such as fees paid to a professional or in a land/house deal and various other transactions. A vast majority of people generate black money by evading taxes – income, sales, VAT and similar levies.  In many land/house deals, the property is undervalued to evade some stamp duty and registration charges.Black money is stashed away in foreign tax havens, gold or precious metals and land/houses. And, politicians spend a portion of their ill-gotten wealth in spending for elections.
Measures to tackle Black money
  • Both State and Central governments should seriously detect and punish officials who are corrupt. The Bihar law to confiscate the properties of any Government employee whose assets are more than his/her sources of income, is worthy of emulation. This is done immediately on filing a charge-sheet on the official, instead of waiting for the tortuous legal process to be completed. The pursuit of money stashed away in tax havens abroad should be serious and time-bound. And, the problem of unending delays in courts should be tackled. One way is to increase the number of judges by the simple expedient of reappointing retired judges, of all cadres, till they attain 70 years of age, and have two shifts, working from 9 a.m. to 9 p.m.
  • Most analysts have repeatedly advocated that funding of all political parties should be through cheques and the parties' accounts should be transparent. 
  • Another measure is to demonetise larger denomination rupee notes.Of the total currency in March 2010, Rs. 500 and Rs.1,000 notes constituted 76.5 per cent.The large part of this high value notes is used to lubricate the well-oiled black money machine. Demonetisation would have to be preceded by increasing the use of plastic money in the form of debit and credit cards. It should be noted that the US withdrew notes above the denomination of $100 in 1969.
3 ways to tackle black money (www.equitymaster)
One is to tax agricultural income, giving farmers a tax exempt limit say 3 times the limit of non farmers. Anything beyond that would be taxed at normal rates. Fake agricultural income is the way politicians and bureaucrats and industrialists whitewash black money. Stop this farce! 

The second is to make it compulsory for all donations to any politician or party to be made against a receipt, with a proper verification of identity (passport, ration card, rent receipt, driver's licence etc). If any such identity is later proven to be fake, the recipient would be fined 1000 times the amount. 

Simple solutions, if there is a real desire to tackle black money and corruption. 

Warren Buffett has similarly proposed a simple solution to the fiscal deficit problem, one that can, and should, be applied in India as well. He has proposed that if, at any time, the US fiscal deficit goes above 3% of GDP, all sitting Congressmen would become ineligible to stand for the next election. Beautiful!