13 JUN 2014
On 27 May 2014, India’s ’s new Prime Minister (P.M.) Narendra Modi on one of his first acts (on his first day in office), was to make it a priority to recover billions of dollars (in Ruppies) stashed overseas to avoid taxes. P.M. Modi immediately created an investigative team of former judges and current regulators to find the concealed financial assets, known in India as black money”, to return them home. At stake is what’s estimated to be as much as $2 trillion, more than India’s annual gross domestic product. P.M. Modi enthusiastically said: “It will send out a loud and clear signal to all tax evaders” But will it?
ARUN KUMAR, AUTHOR OF THE BOOK “THE BLACK ECONOMY IN INDIA” and an economics professor at Jawaharlal Nehru University in New Delhi, calculated the $2 trillion figure said: “There was always a lack of political willpower, and I hope it will be different this time. India is joining countries including the U.S. and Britain in cracking down on rich people who haven’t reported offshore funds”. India ranked third in the world (for money illegally moved overseas in 2011), behind China and Russia. According to Kumar, India (Asia’s third-largest economy) loses an estimated 60 trillion rupees ($1 trillion) each year from its formal sector, such as banks, and almost 6 trillion rupees of that is moved out of the country, Kumar analyzed independent studies and World Bank and International Monetary Fund data on trade flows. His $2 trillion estimate is the total amount Indians currently have stashed abroad illegally, without paying taxes or disclosing the funds to authorities. Kumar added: Tax revenue on those assets could exceed $600 billion, based on a 30 % rate plus penalties, that’s six (6) times the amount India’s federal government estimates it will need to borrow this year to meet expenses. India’s (GDP) yearly fiscal deficit will widen this year to the highest among BRIC countries (Brazil, Russia, India and China) — in part, because taxes, as a proportion of GDP are low. A May 29 International Monetary fund (IMF) estimate showed. “The black money within the country is easier to get at than that stashed abroad…Probing money moved abroad is a rather convenient way of diverting public attention from addressing the larger issue of unaccounted money within the country”- Well…maybe.
SEPARATELY, IN A 2013 REPORT BY “GLOBAL FINANCIAL INTEGRITY”, a Washington-based group researching cross-border money transfers, said that high-net-worth individuals, and private companies are the “primary drivers of illicit (money) flows”. Indians had moved $644 billion to tax havens as of 2011, according to their estimates. (note the wide variance with Arun Kumar’s estimates). One has to wonder if this organization is on the payroll of the tax evaders, and only trying to minimize the extent of the problem.
INDIA’S PRESIDENT Pranab Mukherjee TOLD LAWMAKERS ON 13 JUN 2014, that India will proactively engage with overseas governments to hunt black money, while outlining goals of the two-week-old government, which is also seeking to stimulate economic growth, curb inflation, simplify investment rules and abolish obsolete laws. The government defines black money as assets that haven’t been reported to authorities at the time of their generation or disclosed at any point during their possession. A large portion is converted into gold and held in households domestically. It’s legal for Indian residents to hold money in foreign bank accounts as long as they disclose it and pay taxes.
P.M. MODI’S SPECIAL INVESTIGATIVE TEAM, Will Focus On The Black Money held In Offshore Accounts, and was set up to comply with a Supreme Court directive. The new investigative panel headed by M.B. Shah, a former judge in India’s top court, who has yet to figure out its scope and methods. The panel held its first meeting on 2 Jun 2014, and decided on a “road map” for implementing the court order, according to a government statement.
ENTER: THE SWISS CONNECTION Paulson-Ellis, who used to run the Bank of India business’, said: “This is a particularly good time to collaborate with international agencies chasing unaccounted cash…Private banking systems are being exposed and forced to share client details with U.K., U.S., EU and Swiss authorities. If India can be a part of that dialog, it will get better access to information than was possible historically…P.M. Modi, needs to back words with action”. But …Ellis is now co-head of “Global Emerging Business” at Banco Espirito Santo SA (Inc) in London, so how sincere can he be? Question is: Is he a part of the problem? or, a part of the solution?
SWISS SAY “HSBC does not condone,” the bank said (in an e-mailed response) last week. Mario Tuor, a spokesman for Switzerland’s State Secretariat for International Financial Matters in Bern, said: “Individuals are responsible for their own tax affairs”. Adding that his government can only cooperate within the framework of Swiss law, and it doesn’t allow cooperation based on stolen data, referring to data stolen in 2011 by a former Bank employee. See there!- our hands are tied – Sure, we know!
TAX HEAVENS Switzerland, Liechtenstein and the British Virgin Islands were among tax havens where illegal funds were stashed, A.P. Singh, then director of India’s Central Bureau of Investigation, said in 2012.that Indians were reported to be the largest depositors in Swiss banks, without providing details.
Siamak Rouhani, an official at the Swiss embassy in New Delhi, said on Jun 2014 (in an e-mail):“Switzerland understands and shares India’s wish to fight tax evasion and is committed to complying with the relating international standards”- Yes, we know!- carefully worded language that only seeks to obscure the facts.
SOME INDIANS ARE SKEPTICAL ABOUT RECOUPING THE BLACK MONEY. According to Ashutosh Kumar Mishra, New Delhi-based Executive director of “Transparency International India” (a group that monitors corporate and political corruption) said India needs to raise the issue in international forums and put pressure on foreign banks to disclose information about those who are evading taxes through their branches, he said. “The problem of black money cannot be solved in a day…Lack of proper implementation is what has derailed all well-intentioned announcements like this” Others said…
Bizay Sonkar Shastri, a spokesman for the BJP (Party) said: “The few steps the previous Congress government had initiated was all eyewash…It’s a priority for us, and we will pursue it with all sincerity and seriousness…Unaccounted money reduces the tax base and the ability of the government to tackle the fiscal deficit.
Ashima Goyal, a member of a panel that advises the Bank of India on monetary policy said:“This probe team is very timely. It can also draw upon international treaties drawn up for this”.
MONEY TRANSFERS THRU “HOOK OR CROOK”- hawala. Some undisclosed money is moved out of the country through the global transfer system known as hawala The system is based on trust or family connections and can involve mispricing of goods, financial loopholes and hidden accounting procedures to deliver cash in one country and pick it up in another. Using hawala is illegal in India. Shell companies (in paper only) are set up Tax Heavens to route some of the cash back to India by investments in stock markets, through participatory notes, foreign direct investments, and other instruments. We suppose that is also a method of “spreading the wealth”.
Thanks to Bloomberg for their 13 Jun 2014 story
OUR TAKE AND COMMENT
We said it before. Switzerland Banks are the key to world-wide corruption, and fraud. Our previous article on this subject dealt with USA banking firms doing business with their Swiss counterparts to evade paying taxes for earnings in the USA. Unfortunately, either by USA Internal Revenue System (IRS) collusion, or their legal inability to prosecute such slick trans-national banks, the tax evaders got away by paying a few cents on each dollar, and then only against those tax evaders who surfaced then.
In May 2014 India’s new prime Minister Modi started his tenure by declaring war on those who stashed profits overseas to avoid taxes by appointing a new Investigative Panel headed by Mr. M.B. Shah, a former judge in India’s top court; Unfortunately, he too seems to be scratching his head, wondering how to successfully recoup monies owed to the Indian government by these super-slick tax evaders who are making it very difficult to defray India’s governmental expenses. It seems quite clear Mr. Shah, and other judges/businessmen, in India agree that the Swiss connection is deeply involved. Problem is: How to “pin the tail on the donkey”. Many fear that P.M. Modi’s initiative may be not really “A loud and clear signal” to tax evaders, but rather “political-posturing” so that he may later say: Well…we tried from day one. The proof to his strength of purpose will be the resolve he shows in the days to come. We wish him the best! – An anecdote: A man said to another: “I never turn on the light in the kitchen at night, because the roaches all come out”. HMM! No wonder it is “lights out” in India too.
Edward Oliver Gonzalez (gonzedo)
e-mail > firstname.lastname@example.org
RELATED ARTICLES: THE SWISS CONNECTION – KEY TO WORLD-WIDE CORRUPTION AND FRAUD Feb 2014 http://energymaters.com/?p=1429
June 13, 2014 at 7:46 PM Comment (1)