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Unit 3: Corporate Tax Planning

But businessmen feel that these restrictions are unjustified. They take the maximum Notes

advantage of these provisions but do not like to part with the remaining part of by various
clandestine devices; they convert it into black money and use it either for conspicuous
production to satisfy the wants of the rich and elite sections of society.
(vii) Unscrupulous Charitable Trusts and Societies Create Tax Evasion: Unscrupulous charitable
trusts and societies including religious institutions manipulate the funds of the institutions
run and managed by them and create black money.

Example: A stark example of this has come to light when crores of rupees in hard cash and
several more crores of rupees worth jewellery, diamonds and other valuables have been taken
over when the personal chambers of the late Satya Sai Baba were opened recently at Puttaparthy
in Andhra Pradesh. There are a lot of discussions going on in the matter whether the money
found at Satya Sai Baba’s Ashram at Puttaparthy is accounted or unaccounted money. Only

sincere investigations undertaken by the government in this matter can find out the exact truth.
This is one example which has come to light and many more are still likely to exist running this
fraudulent business simply because such institutions had been exempted to submit the reports of
their income and expenditure. It is feared that a lot of tax evasion is taking place at the religious,
social and educational trusts throughout the length and breadth of the country.

(viii) Foreign Banks are Havens for Tax Evaders: Foreign banks especially the Swiss Banks
which do not disclose the particulars of the account holders have become a safe haven for
the people who want to hide their income without paying the taxes. There are different
versions by different sources as to amount of the black money stashed in Swiss Banks.

Example: As alleged by Baba Ramdev during his agitations against black money,
the amount of black money stashed in the Swiss banks ranges between ` 50-75 lakh crores of
rupees.
(ix) Prohibited Trades: Important source of unaccounted money generates from illegal
activities like large-scale smuggling of gold, diamond and numerous luxury products and

drug trafficking leads to tax evasion.
3.3.3 Impact of Tax Evasion

The impacts of tax evasion are as follows:

(i) Country’s Economic Growth: The biggest impact of tax evasion is that it halts the country
GDP growth due to lack of funds from government. Government earning is depends upon
the tax revenue. If the public will not pay the tax to government, Government cannot fund
to particular sector which needs the funds for their better operation. Due to lack of funds
government force to have take loan from World Bank or other’s countries, which will
increases the burden of foreign debit on the government.
(ii) Increase the Infl ation: The infl ation rises while the black money circulates in the market.
The price of eatable/others goods are increased to supply of that black money and less
production of things in the market. So people which have that money they offer more price

in the market. As compared from other person in the market. Higher inflation has affected
middle and poor class families very badly. Since high amount of cash in limited hands has
increased the purchasing power to that limited people and hence resulted in growth of
market and prices.
The government taxes the people to earn revenue for its expenses in order to balance the
budget. It is but natural that if the black money circulating in the economy is brought back
to the government’s treasury, the government will have more money in its hand for its
expenses and thereby the tax burden on the people can be reduced.

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