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What Is Black Marketing?

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
07 Nov 2016 11:00
What Is Black Marketing?
Black Market

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:

  • Extreme high rates of taxation
  • Excessive regulation of trade and 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-to-income 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: 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.

nNext Week: Refusal to Sell

nThis 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,Aque sum qui qui simusam alicidelic te si to est quam, volor aute et porepel molorro toratem



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