Every country in the world has its own set of taxes on money coming in and going out. Some poor or underdeveloped countries frequently have high taxes, whilst other financially sound countries have minimal taxes because of their stable economy. Remittances are a perfect example of how each nation in the world taxes every transaction.
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There are numerous situations, but I chose this one because Remittances and Hawala Hundi are my current topic of conversation and I will shed light on these two mediums and will discuss the difference between these two. What exactly is remittance? Remittance occurs when a person wishes to transfer money from one country to another via a legal process conducted through a bank or company.
Who is the most likely to use remittances? Foreigners who are studying, working, or otherwise live outside the country. They use this method to send money to their family for a variety of purposes, including family support. This is legal all throughout the world and is done using many electronic mediums such as Western Union, MoneyGram, RIA, and others.
These are excellent companies that allow you to transfer money from one country to another. Different countries have varying taxes, such as Pakistan, which has a 10-12% tax on each transaction, whilst other countries have a lower tax. Any money transferred via any media will require your entire bio-data as well as the purpose of the transaction.
All of this is done to safeguard money from being used for money laundering or terrorist acts. That is why it is classified as legal. These funds can be obtained through these companies or any bank that provides services to these companies. This is without a doubt an easy way to move money from one location to another in a secure system.
But the question is why is HAWALA HUNDI being brought in for the purpose of money transfer? Let's talk about HAWALA HUNDI and what it signifies and how it works. This term is derived from Hindi and refers to money that is transferred in an informal or illegal manner. The term Hawala in other words refers to the illegal transfer of money without paying taxes to the government.
Who makes use of Hawala Hundi? This medium is used by a wide range of people to transmit money. People that use this medium for the aim of money laundering are one type. They collected fraud money or black money and now want to legalise it and convert it to white money by sending money to different account.
They utilise this medium to send money to relatives in distant nations and subsequently collect the money from them. In this manner, black money is changed to white money and it provides them a reason of transferring money, which can then be used for business purposes or any other earning process. Another type of person uses this medium to avoid paying taxes.
As already mentioned, the government collects taxes when money is transferred from one country to another. The taxes are not low but are very high as I am ex-banker and I know about it very well. Many poor people use this medium to save the money that is deducted for the taxes. While some people utilise this money to commit terrorist attacks, this is unacceptable.
This is the major distinction between remittances and hawala, and how people use these two mediums to meet their needs. Governments are also responsible for charging high fees on cash transfers, forcing people to adopt an alternative method, which is Hawala.
This is an attempt on my part to educate you on the subject of remittances and hawala. I also talked about the differences they have with one another. I hope you find this material interesting and educational. If you like the post, please leave feedback in the comments section so that the next one will be even better. Thank you for sticking with me until the end.
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