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Impact of Black Money on Sri Lankan Economy

Date : 2020-Nov-25

Black money includes all funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes. Black money proceeds are usually received in cash from underground economic activity and, as such, are not taxed. Recipients of black money must hide it, spend it only in the underground economy, or attempt to give it the appearance of legitimacy through money laundering.

The informal credit market or the extent of black money has been estimated at approximately 13 billion rupees or about 6% of annual GDP. It is difficult in the absence of relevant data to quantify, on a definite basis the quantum of foreign money held undeclared by resident persons abroad or the informal foreign exchange market and the entire underground economy (Inland Revenue Department, 2020).

Black money is financial wickedness. The presence of quickly developing Black money in our economy has grave and heartbreaking outcomes. The significant impacts of Black money is examined beneath:

The expansion in the measure of black money in Sri Lankan throughout some stretch of time lead to the never-ending development of financial dualism which comprises of Parallel economy (Black money economy) working one next to the other with the Official or Reported economy on the nation. The dark economy speaks to at least one fifth of the total financial exchanges. There is additionally collaboration between the announced and unreported exercises with the end goal that it is hard to distinguish black money from the white cash economy. Quite a Parallel Economy will destroy the whole monetary advancement of the Sri Lankan nation.  Black money is to a great extent credited to tax avoidance. Its immediate effect is the deficiency of the Government income. Since the Government neglects to get adequate duty income because of huge scope tax avoidance, it is compelled to fall back on high tax collection and deficiency financing which again convey their evil monetary impacts.

At the point when the Government resorts to reformist direct tax assessment to keep up value in the appropriation of the taxation rate, the tax avoidance and development of Black money influence the very idea of social equity by not permitting the alluring decrease in imbalances of salaries. Once more, when secret exercises like pirating and so forth couldn't be burdened, the Government will force higher charges on formally authorized exercises.

Black money is to a great extent liable for the disintegration of general good principles of the general public. Black pay age infers a deviation from the acknowledged standards in the public arena and from the perspective of the general public is deceptive.  Socially, can be stated that the structure and ethos of a general public goes through a huge change. Social estimations of genuineness, difficult work, frugality and straightforwardness get dissolved. Indeed, even the political foundations and associations lose their validity as they likewise steadily become a piece of the whole arrangement of dark pay age