Black Money Current Affairs - 2019
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In an affidavit filed before the Supreme Court, the Election Commission of India has made the following observations:
- Electoral bonds, contrary to government claims, wreck transparency in political funding.
- Electoral bonds coupled with the removal of the cap on foreign funding invites foreign corporate powers to impact Indian politics.
- Electoral bonds would cause a “serious impact” on transparency in the funding of political parties.
The Election Commission of India further criticises amendments made to various key statutes through the two consecutive Finance Acts of 2016 and 2017.
What were the amendments made?
The Finance Act of 2017 amends various laws, including the Representation of the People Act of 1951, the Income Tax Act and the Companies Act. The Finance Act of 2016 makes changes in the Foreign Contribution (Regulation) Act of 2010.
The amendment to Representation of the People Act allows political parties to skip recording donations received by them through electoral bonds in their contribution reports to the ECI.
The amendments introduced to the Income Tax Act allow anonymous donations. Donors to political parties are not required to provide their names, address or PAN if they have contributed less than Rs. 20,000. The Election Commission notes that many political parties have been reporting a major portion of the donations received as being less than the prescribed limit of Rs. 20,000.
The Finance Act of 2016 allowed donations to be received from foreign companies having a majority stake in Indian companies.
Observations by Election Commission
The Election Commission of India called these measures as a retrograde step and the ECI has no way to ascertain whether the donations were received illegally by the political party from government companies or foreign sources.
The Election commission also expressed concerns that these amendments would pump in black money for political funding through shell companies and allow unchecked foreign funding of political parties in India which could lead to Indian politics being influenced by foreign companies.
Tags: Black Money • Companies Act • ECI • Election Commission of India • Electoral bonds • Finance Act 2016 • Finance Act 2017 • Foreign Contribution (Regulation) Act 2010. • Income Tax Act • PAN • Political Funding • Representation of the People Act 1951 • Shell Companies • Supreme Court
The minutes of meeting which had approved the demonetisation of Rs 500 and Rs 1000 currency notes has been revealed through RTI. The government had contested that demonetisation would help curb black money and a steep rise in Rs 500 and Rs 1,000 notes; check the circulation of fake currency and promote e-payments and financial inclusion.
Observations made by RBI
- RBI Directors had contested the government’s claim about curbing black money by highlighting that most of the black money is held not in cash but in the form of real sector assets such as gold or real estate and this move would not have a material impact on the assets.
- RBI Directors refuted the government’s argument about the growth in high denomination notes being much faster than the pace of economic expansion, by reasoning that when adjusted for inflation, the difference may not be so stark.
- RBI has stated that even though the incidence of counterfeiting is a concern, Rs 400 crore as a percentage of the total quantum of currency in circulation is not very significant.
Despite these reservations and disagreements, the RBI board had approved the demonetisation in larger public interest as it provided an opportunity to promote financial inclusion and digital payments. Further the government had assured the RBI directors that it would take measures to contain the use of cash and promote financial inclusion and electronic modes of payment.