What is black mar­ket­ing?

Fiji Sun - - Business -

Black mar­ket­ing is the il­le­gal trade of goods and ser­vices with the in­ten­tion to evade the law­ful re­quire­ments of such trade. Two such com­mon tac­tics used are to in­crease the price be­yond the con­trolled price or lower the price be­low the nor­mal to evade tax­a­tion is­sues. The in­come de­rived from such il­le­gal trade is of­ten re­ferred to as ‘black money’. Un­der the Com­merce Com­mis­sion De­cree 2010 (CCD2010), black mar­ket­ing be­comes a breach if – I.Any per­son en­gaged in trade or com­merce sells any goods for pur­poses of re­sale, un­less the per­son is sat­is­fied –

(a) that the goods are re­quired by the buyer, in good faith, for the le­git­i­mate pur­poses of his busi­ness; and

(b) in par­tic­u­lar, that the ef­fect of the trans­ac­tion whether, by it­self or taken in con­junc­tion with trans­ac­tions of the same or of a sim­i­lar na­ture, will not be to in­crease or will not tend to in­crease the price to the ul­ti­mate buyer of the goods above a fair and rea­son­able price (whether that price be a law­ful price or not).

II. This sec­tion does not ap­ply with re­spect to the sale of any goods to a re­tailer for pur­poses of re­tail sale. Com­mon causes of black mar­ket­ing?

The two com­mon causes of black mar­ket­ing in an econ­omy are: com­merce. Why is black mar­ket­ing a prob­lem? Black mar­ket­ing is an eco­nomic prob­lem for the fol­low­ing rea­sons :

Loss of taxes: The di­rect ef­fect of black money is the loss of rev­enue to the state ex­che­quer since tax is not paid on this money.

Hin­ders coun­try’s eco­nomic growth: Due to lack of funds with the govern­ment, the govern­ment can­not fund ap­pro­pri­ately the sec­tors which re­quire at­ten­tion, which leads to poor per­for­mance of these. Also, the Govern­ment is forced to take debt from for­eign in­sti­tu­tions like the World Bank, which in­creases the fis­cal deficit and thus bur­dens the Govern­ment.

It can be­come an ob­sta­cle to a coun­try’s de­vel­op­ment met­rics: Due to the ex­is­tence of black money in the so­ci­ety, a coun­try is un­able to eval­u­ate its suc­cess ac­cu­rately. Pre­cise cal­cu­la­tion of sav­ings-toin­come pro­por­tion and sec­tor-wise make up of coun­try wide in­come is not pos­si­ble due to the pres­ence of un­ac­counted in­comes. Black money is the in­come that is un­ac­counted. Also, black money is gen­er­ally stored in some tax haven na­tion. Thus, un­know­ingly, act­ing as in­vest­ments for a richer and more ad­vanced na­tion;

Il­le­gal Trans­fer of Funds: Black money is trans­ferred to for­eign coun­tries. This is done il­le­gally through clan­des­tine chan­nels. These trans­fers vi­o­late ex­change laws. Eg: Un­der-in­voic­ing of ex­ports and over-in­voic­ing of im­ports.

Black mar­ket­ing can also be a so­cial prob­lem based on the fol­low­ing rea­sons : Fos­ters anti-so­cial el­e­ments: Black money re­quires cor­rupt ac­count­ing ex­perts, li­ai­son of­fi­cers etc. to sur­vive. Peo­ple are find­ing out new ways to gen­er­ate black money, thus de­grad­ing our ethics and morals. Also, money earned this way is gen­er­ally spent in un­de­sir­able and vul­gar man­ner. Virtues like hard work and hon­esty are un­der­es­ti­mated;

Im­proper use of prof­itable as­sets: as­sets: Flow of black money widens the gap be­tween the rich and the poor. Peo­ple at the higher rungs have eas­ier ac­cess to un­ac­counted in­come, which is ev­i­dent from news we see ev­ery day. Also, these peo­ple have the money to bribe of­fi­cials and politi­cians to pro­tect their black money;

In­crease crimes: Pres­ence of black money has led to the re­duc­tion of em­ploy­ment op­por­tu­ni­ties in a coun­try. This has in­di­rectly led to an in­crease in crimes.

In­crease in prop­erty prices: A high per­cent­age of black money is in­vested in prop­erty. Hence, this has led to an in­crease in the de­mand of prop­erty. As a re­sult of this, the prices of land and houses have in­creased be­yond the reach of a com­mon man. Nowa­days, own­ing a house is a dream, most peo­ple can­not ful­fill their en­tire life.

Dam­ages a coun­try’s Rep­u­ta­tion: Black money and cor­rup­tion de­te­ri­o­rate a coun­try’s rep­u­ta­tion to the for­eign world. Many big busi­ness­men do not want to in­vest in such coun­tries ow­ing to the cor­rup­tion preva­lent here. This in turn af­fects a coun­try’s econ­omy.

Next Week: Re­fusal to Sell

This is a weekly column compiled by the Fiji Com­merce Com­mis­sion in the hopes of rais­ing aware­ness on what the FCC does so peo­ple can ben­e­fit from de­vel­op­ing a bet­ter un­der­stand­ing,

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