For the government and the economy, growth in black money is worrying because government loses out on taxable income and can never be used for nation building
NEW DELHI (Commodity Online): India government has filed an affidavit before the Supreme Court naming three prominent businessmen Pradip Burman, formerly of Dabur Group, Goa based miner Radha S Timblo and Rajkot based bullion trader Pankaj Chimanlal Lodhya.
These businessmen had allegedly stashed money abroad and the government has stated that that information received from foreign countries will be disclosed in all cases where tax evasion is established.
Meanwhile, Dabur India has issued a statement saying that there was nothing illegal about Pradip Burman's account abroad as he had opened it while he had non-resident Indian status and Lodhya has denied having any Swiss bank account.
"I have no account in the Swiss bank. I have no foreign bank account. I came to know about this from media.... I am shocked," Lodhiya told reporters here.
"I have declared all my wealth before the Income Tax department," he said.
Why black money is worrying
Several Indians are reported to have stashed crores of rupees abroad mainly in Swiss bank accounts and Wiki Leaks had come out with several prominent names recently.
For the government and the economy, growth in black money is worrying because government loses out on taxable income and can never be used for nation building. On the other hand it enables lot of clever people who manipulate the system, evade taxes and generate huge wealth creating inequality in society. According to some estimates, the amount of black money in Indian economy could rival that of the nation's GDP- with black money stashed abroad estimated at $1.4 trillion.
How could a bullion dealer generate and store black money: Here are some possibilities identified by Commodity Online Research Desk:
-Physical dealers make changes in purity of bullion and this never gets accounted.
-Gold cannot be held in purest form for making jewellery and other metals are mixed for durability which customers are not aware.
-Buying physical gold or silver is more expensive than investing in an ETF, so that dealers charge a premium like cost of delivery, storage and insurance and when you sell your dealer will take a cut.
-Physical dealers are also taking making charges when you buy and they cut that when you sell and they can also change the form of the purity
-Physical traders may buy in Nuggets or bars in Bullions and depending on purity and other factors and they can change later on depending on requirements. They are not as easy to buy and sell as bullion bars or coins.
-Bullion traders also trade in futures market and taking that delivery of bullions and they can easily make ornaments from their metals with adding some other some metals and they are making some profits also.
-Chimanlal Lodhya had other businesses include Real estate and ornaments which could have been a safe conduit to transact unaccounted money.
Lodhiya is the owner of city-based Shreeji Trading Company, which is involved in bullion trading. It has business links in all major cities of the country for gold trading.
The firm offers wholesale delivery of bullion to domestic users like ornament manufacturers, goldsmiths, jewellers and semi-wholesalers.
The group, established 15 years back, has branch networks in Ahmedabad, New Delhi, Jaipur, Raipur, Indore and Bangalore, its website said.
It has two subsidiaries - Shreeji Ornaments Pvt Ltd and Shreeji Realty.
Lodhiya's firm also started a spot precious metal online trading system called Shreeji Spot in 2008.
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