No one can be accurate in telling the real black money of Indians abroad.While reading across I came through DNA Money which Says that 'Indian money in Swiss & other banks is over Rs 70 lakh crore.' Which is 1.4 trillion much higher against our current(07-08) GDP of Rs 43 lakh crore.If the amunt in black money is counted in our GDP our actual GDP comes above 2 trillion $. But as every one whats to save tax and stay rich by keeping money abroad tax free its not possible for India to have GDP of ver 2 Trillion $.
Which are the various tax havens where the ill-gotten wealth of Indian businessmen and politicians is stored?
There are presumably more than 70 tax havens in the world. Indian wealth could be more in Switzerland and various British/ US islands.
How much Indian money do you think would be locked away in Swiss banks? What is the basis for the estimate you make?
I make this estimate on the basis of a report titled "Illicit Financial Flows from Developing Countries: 2002--2006, Global Financial Integrity," written by Dev Kar and Devon-Cartwright Smith. It was a project sponsored by the Ford Foundation and the final report was released sometime back in December 2008.
Financial flows in the context of this report include proceeds from both illicit activities such as corruption (bribery and embezzlement of national wealth), criminal activity, and the proceeds of licit business that become illicit when transported across borders in contravention of applicable laws and regulatory frameworks (most commonly in order to evade payment of taxes).
In 2006, the most recent year of the Global Financial Integrity (GFI) study, developing countries lost an estimated $858.6 billion to $1.06 trillion in illicit financial outflows. Even at the lower end of the range of estimates, the volume of illicit financial flows coming out of developing countries increased at a compound rate of 18.2% over the five-year period analysed for the study.
How much of this was siphoned out of India?
On an average, for the five-year period of this study, Asia accounts for approximately 50% of overall illicit financial flows from all developing countries. This report shows that the average amount moved from India annually during 2002-06 is $27.3 billion. This means, during the five-year period, the amount taken away is $27.3 billion x 5 = $136.5 billion.
It is not that all these amounts went to Swiss banks; it has gone to different tax and secret shelters. The share of Swiss banks in this dirty money is a third of the global aggregate; some $45 billion out of the 136.5 billion stashed away from India would have been hoarded in these years in Swiss banks. This appears in page 30 of the report mentioned above.
The important point is that this is only for five years. More amounts were stashed away during the Nehruvian socialist regime. So the loot for 55 years would be several times the amount. In fact, in those days, the Indian rupee commanded a better value per US dollar, so fewer rupees could get a dollar. Hence the estimation that Indian money stashed away may be of the order of $1.4 trillion.
How did the money get out?
There are several methods/ reasons --- under-invoicing/ over-invoicing of exports and imports and getting the balance stored abroad; kickbacks from major defence/ civilian contracts; in the olden days, smuggling of gold and illegal money; transactions done abroad and not reported here; hawala funds; funds earned by artists/ entertainment industry/ sports people and stashed away abroad, etc. When you want to indulge in adharma, hundred ways are open.
Do you feel international terrorist organisations use the tax-haven route to send across money to finance their nefarious activities?
Even our national security advisor, M K Narayanan, has spoken about it in Berlin.
You recently wrote, "Under pressure from federal authorities, Swiss bank UBS is closing the hidden offshore accounts of its well-heeled American clients, potentially allowing their secrets to spill into the open."
Do you feel the government of India should also demand all the Indian black money in Swiss banks back?
Of course, India should and must act. We are not a banana republic.
How can the government go about doing this?
By putting it on the global agenda. Put it in G20. Put it in IMF. Put it in Egmont Group. Also take a lead among all developing countries. Support US/ German/ French efforts.
Do you feel Swiss authorities and other tax havens will cooperate with us on this issue if we take the initiative?
It is not our pressure but that of the US, which will make them cooperate. When a family is in deep financial crisis, it tries to look at the small amount saved under the sugar jar by grandma. In the same way, developed economies are desperate for every dollar.
Even if we do not act due to their efforts, the list of crooks may be out. Then, we will be in a dangerous social situation since the who's who of India will be there. Instead, we should get the list and get the funds and decide on the steps to sterilise it and the punishment to be given out, etc. Otherwise the world will laugh at us. We will be worse than a Nigeria (Sani Abacha) or Phillipines (Markose).
Do you feel the government will do this, given that a lot of the black money belongs to politicians?
Public pressure will make them do it. Plus, the evolving global situation against tax havens also might act in our favour. The money belongs to the poor farmers and unorganised workers.
Do you see businessmen applying pressure on the government to thwart any attempt to get back this money?
The world situation is such that Indian businessmen will want to bring it back now, given the attractive returns in India. The entire proprietary notes route to invest in the stock market was conceived for that.
You wrote in one of your columns that the German foreign intelligence agency BND got the names of 1,400 clients of the Liechtenstein-based LTG Bank who were suspected tax evaders. Of the 1,400, only 600 were supposed to be Germans. Do you think the rest would include Indians? Has the Indian government approached the German government for the list?
Indian names will be there. Our tax evaders and crooks are like Maha Vishnu, present in all continents and all tax havens, in the sea, on the earth, in the air. But our government has been lukewarm in its response to this issue. It should have immediately dispatched senior officials and the finance minister to get the names. via.