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Chemicals, construction, mining among 11 sectors seen generating black money: Report

Author: IANS/Friday, May 19, 2017/Categories: National

Chemicals, construction, mining among 11 sectors seen generating black money: Report

Chemicals and chemical products, construction, land transport, agriculture, petroleum products, iron and metallic products, are among the 11 sectors seen as "more prone to generation or utilisation of unaccounted incomes", according to a government-commissioned report on black money.

  
 
 Electricity, communication, mining, machinery manufacturing, and trade and business services are the other sectors, the National Institute of Public Finance and Policy (NIPFP) report on black money said while estimating that about Rs 5.3 lakh crore (at the current exchange rate of Rs 64/US dollar) flowed out of India illegaly in 2007.
 
 The 1,200-page report, which is yet to be made officially public, was commissioned in 2012 by and presented in 2013 to the Central Board of Direct Taxes (CBDT) under the Congress-led United Progressive Alliance (UPA) government. Economic & Political Weekly, in collaboration with Business Standard, recently uploaded the report. 
 
 The pharmaceuticals sector alone generated Rs 46,200 crore black money in 2009-10 while, in 2010, under- or over-billing exports from, or imports to, India cumulatively generated about Rs 2.3 lakh crore of black money.
 
 The flow of black money abroad ranged from less than one to seven per cent of gross domestic product (GDP) between 2000 and 2010, according to the NIPFP report.
 
 Exports are used for illicit outflows to countries such as the US, the UK, China and Mexico. For countries such as Hong Kong, Netherlands, Switzerland and Singapore, both exports and imports are associated with illicit inflows or outflows.
 
 The NIPFP report identified 11 sectors as "more prone to generation or utilisation of unaccounted incomes": Chemicals and chemical products, construction, land transport, agriculture, petroleum products, iron and metallic products, electricity, communication, mining, machinery manufacturing, and trade and business services.
 
 Real estate and gold and jewellery were identified as the sectors where major unaccounted incomes might be held as wealth.
 
 "At least for medical professionals, fashion designers, legal professionals," the NIPFP report pointed out, "there is large scope for under/non-reporting income due to high incidence of cash/without-bill transactions."
 
 There is no relation between returns of income and service tax filed by professionals, clearly indicating rampant non/under-reporting of incomes and inflation of expenses, the report argued.
 
 In the mining sector, "inadequate monitoring and regulation has resulted in extensive misuse of licences resulting in over-mining supported by widespread corruption", the report said.
 
 "The average unaccounted incomes as a percentage of reported GDP from the minerals" for the decade 2001-10 has been estimated to be 10.32 per cent, excluding illegal mining.
 
 Lack of coordination between multiple regulatory agencies in the pharmaceutical sector -- a representative for the chemicals industry -- has led to substantial under-reporting of sales and sale of spurious drugs between 2000 and 2010, the NIPFP report argued.
 
 The large presence of small-scale units has also made monitoring difficult in the pharma sector, the NIPFP report noted.
 
 Pharma companies should be issued single-use stamps to be pasted on each unit they produce, the report suggested, citing the use of prepaid tax stamps in American states to control drug trade.
 
 Public distribution system (PDS) kerosene diverted to adulterate diesel (36 per cent of total sales by volume, according to NIPFP estimates) created Rs 11,910.1 crore unaccounted income in 2011-12, the report estimated. Price control of kerosene and tax structure of both products are blamed for this diversion.
 

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S Vijaykrishnan
S Vijaykrishnan

IANS

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