Black money in Switzerland and other tax havens

Discussion in 'Economy & Infrastructure' started by LETHALFORCE, Apr 2, 2009.

  1. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    http://election.rediff.com/intervie...iss-black-money-can-take-india-to-the-top.htm

    'Swiss black money can take India to the top'

    March 31, 2009


    R Vaidyanathan

    Indian money stashed in the Swiss Bank has become a focal point of debate, especially after the Leader of Opposition and the Bharatiya Janata Party's [Images] prime ministerial candidate L K Advani [Images] raised the issue on Sunday. If elected, the BJP has vowed to bring the black money back home. Though the Congress dismissed the idea, the Swiss bank issue is slowly becoming a hot election issue.

    In fact the BJP also plans to carry out a mock election across the country on April 6 where people will have to cast their vote indicating whether Indian money in Swiss banks should be brought back to India or not.

    During his address, Advani said the BJP will form a task force comprising experts to prepare a strategic document for India to recommend ways to get back the national wealth stashed away illegally by corrupt politicians, businessmen and criminal overlords.

    One of the names he mentioned in the task force is Professor R Vaidyanathan, Professor of Finance at the Indian Institute of Management, Bengaluru [Images].

    In this exclusive interview to rediff.com's Vicky Nanjappa, Vaidyanathan explains in detail the importance of bringing back the ill-gotten wealth and how the money got there in the first place.

    Firstly how much Indian money do you think is stashed away in the Swiss Banks?

    In 2006, the most recent Global Financial Integrity study, developing countries lost an estimated $858.6 billion (about Rs 43 lakh crore) to $1.06 trillion (abot Rs 51 lakh crore) 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 percent over the five-year period analysed for the study. On average, for the five-year period of this study, Asia accounts for approximately 50 percent of overall illicit financial flows from all developing countries.

    This report shows that the average amount stashed away from India annually during 2002-06 is $27.3 billion (about 136,466 crore). It means that during the five-year period the amount stashed away is 27.3x5=136.5 billion (about 692,328 crore). 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 dirty money being 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.

    The important point is that this is only for five years. More amounts were stashed away during the Nehruvian regime. So the loot for 55 years will be several times higher. In fact, in those days the rupee commanded a better value per dollar. So fewer rupee could get more dollars. So the estimation that the Indian money stashed away may be of the order of $1.4 trillion (about Rs 71 lakh crore).

    On what basis have you come to this conclusion?

    There is a lot of literature available as to how to estimate the illicit financial flow from developing countries. We find out what the nature of the flow is. I have also relied upon the study Illicit Financial Flows from Developing Countries: 2002-2006 Global Finanacial Intergrity authored by Dev Kar and Devon-Cartwright Smith, a project of the Ford [Images] Foundation. Financial flows in the context of this report includes the proceeds from both illicit activities such as corruption (bribery and embezzlement of national wealth), criminal activity, and the proceeds of ilicit business that become illicit when transported across borders in contravention of applicable laws and regulatory frameworks (most commonly in order to evade taxes).

    Which are the various tax havens, where the ill-gotten wealth of Indian businessmen and politicians are stashed?

    There are presumably more than 70 tax havens in the world. Indian wealth could be more in Switzerland [Images] and various British /US islands. At least 40 countries market themselves aggressively as tax havens [Source: Internal Revenue Service USA on Abusive Off-shore Tax Avoidance schemes �Talking Points Jan 2008]. The well-known tax havens are Switzerland/ Liechtenstein/Luxemburg/ Channel Islands etc.

    Could you elaborate and tell us how the money got there in the first place?

    There are several methods/reasons. Under invoicing/over invoicing of exports and imports and getting the balance stored abroad. Kickbacks from major defense/civilian contracts. Not bringing the earnings abroad. In the old 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 abroad. When you want to indulge in adharma, hundreds of ways are open!

    We would like to know the terror connection. Do you think even terrorists are stashing away cash and using the tax haven route to send across money all over the world, to finance their activities?

    M K Narayanan, our National Security Advisor, has spoken about it in Berlin recently.

    Advani says that it is important to bring this money back. How can the government go about it and what are the various ways in which India can get its money back?

    Put it on the Global Agenda. Put it in G-20. Put it in the International Monetary Fund. Put it in Egmont Group. Also take a lead among all developing countries. Support US /German/French efforts.

    If India decides to take the initiative, will the Swiss authorities cooperate?

    It is not due to our pressure but that of US which will make them co-operate. When a family is in deep financial crisis then it tries to look at the small amount saved under the sugar jar by grandma. 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 it and get the funds and decide on the steps to sterilise it. Otherwise, the world will laugh at us.

    Politicians sure must be having a lot of money in Swiss Banks. Do you think this factor will deter the government from acting?

    Public pressure will make them do it. Plus, the evolving global situation against tax havens. The money belongs to the poor farmers and unorganised workers of India. Also, Indian businessmen have a lot of their ill-gotten gains in these banks. The world situation is such that Indian businessman will want to bring it back now given the attractive returns in India.

    Do you think that the Indian government should demand all the Indian black money in Swiss banks?

    Of course. India should and must act. We are not a banana republic.

    You wrote in your column that the German foreign intelligence agency BND got names of 1,400 clients of the Liechtenstein-based LTG bank who were supposed to be suspected tax evaders. Of the 1,400, 600 were supposed to be Germans. Do you think of the remaining there will be Indians as well? Has the Indian government approached the German government for the list?

    Indian names will be there. Our tax evaders and crooks are like the omnipresent Maha Vishnu [Images] -- present in all continents and all tax havens. But our government has been lukewarm in this issue. It should have despatched immediately senior officials to get the names.

    Isn't it important to tackle the issue of domestic black money?

    It is definitely important. At least the domestic black money is used in our economy and to that extent it is productive. But the money kept in Swiss banks is neither useful to India nor does it benefit Indians.

    What role should the media play?

    The media has a very important role to play. At the moment it seems like most part of the media is more interested in the diet of an actress. Pressure by the media needs to be built up on this issue and remember that a lot of Indians don't just go to Switzerland to ski.

    What about the names of these persons?

    India must try and get the names. But more importantly should get the money back. It should be top on the agenda and India ought to take a moral lead in this issue.

    Will the Indian economy improve if the money is brought back?

    It will do phenomenally. India will be in the top five league if all the ill-gotten money is brought back. It will change the Indian scenario and I have been saying this since 1993.

    Do you think that these people will now try and pull out the money since this issue has become a hot topic?

    I don't think so. If they do then India should create an instrument and regulate frameworks to bring the money back.

    What kind of punishment do you suggest for these persons?

    Punishment is not the issue now. There is a need to create fear in them and follow what the international community does on this issue.

    Lastly do you think this is becoming just another election issue?

    The US and Germany [Images] took the lead and there is no election there. We should not treat this as an election issue. We have to take up this matter and if we don't then we will become a laughing stock of the entire world.
     
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  3. K Factor

    K Factor A Concerned Indian Senior Member

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    Congress leaders (e.g. Rajiv Gandhi & Narsimha Rao - through Bofors) have made quite a lot of hay when the sun shone........
     
  4. johnee

    johnee Elite Member Elite Member

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    recently, I had a debate with my dad about this, he said that rajiv gandhi was the unofficial prince of india, gandhi family the royal family of india, they didnt have to make money through a scam. wat do I tell him? anyone has a good counter arguement to convince the aam aadmi of india?
     
  5. K Factor

    K Factor A Concerned Indian Senior Member

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    Whats that supposed to mean? Royal Family? Didn't get that mate!!

    India is not Nepal my friend.
     
  6. johnee

    johnee Elite Member Elite Member

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    I mean ppl believed that they are the natural rulers of india, all power vested with them. nehru had helped india financially(told by my father). so why would rajiv gandhi do a scam for meagre money.

    this is the retort of many congress loyalists(though my father is not a loyalist) and this arguement is bought by the aam aadmi. how do we counter it?
     
  7. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    this has to be more than just Gandhi Family money there are/were many crooked politicians who may have hid money?
     
  8. screwterrorists

    screwterrorists Founding Member

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    well first of all, a bunch of it is gandhi family money: this can be certain.

    also i dont buy BJPs promise of bringing all the money back home. its nearly impossible this money will be returned. The swiss bank will be ruined. even the US was only able to obtain the names of those that committed tax fraud i believe. and they had evidence for it. and names.
     
  9. Antimony

    Antimony Regular Member

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    It does not matter who stashed the cash. Tonnes of people either default on taxes or stash away ill gotten gains, or both. The list may include politicians, industrialists or bureaucrats.

    The main benefit behind this, in my view, is that the relisation that ill gotten gains would be more difficult to salt away. Already, opening a Swiss numbered account is much mroe difficult that what it used to be. However, to be honest, if the IT department did a better job then we would have prevented at least some of this anyway

    By the way, what are we going to do with the money? Pay down national debt? Build infrastructure? A lot of the money allocated for such development purposes lie undersutilised
     
  10. johnee

    johnee Elite Member Elite Member

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    a question related to this was asked to MMS in G20 meet by a journalist to which he replied that this was one form of protectionism by the banks and india was against such protectionism and was in touch with european countries in this regard.
     
  11. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    would the swiss cooperate if they know they will lose these deposits?
     
  12. K Factor

    K Factor A Concerned Indian Senior Member

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    One IT Officer I happen to know has 2 LCDs and one plasma TV, a Honda City and a Mitsubhishi Lancer and 4 flats)
     
  13. johnee

    johnee Elite Member Elite Member

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    there are always ways to persuade ppl..........:dk:
    but whether we have that ability, thats the real question.
     
  14. johnee

    johnee Elite Member Elite Member

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    explains everything.
     
  15. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    swiss are suppose to have strong secrecy laws, even USA is haing a hard time with Bernie Madoff who stole 50 BILLION dollars and hid it in swiss banks, I don't know how we would be able to persuade? ****BEST IDEA**** let people bring deposits back without any question, punishment or tax it would be a blast for the Indian economy.
     
  16. johnee

    johnee Elite Member Elite Member

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    if we can create a situation where those guys they will lose all their money if it is left in swiss banks but they can save great amount of it if they themselves can surrender some of it, the ppl will themselves bring deposits back and also pay 'some' to govt.

    this is the broad idea, the details can be worked out or may be not.
     
  17. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    the govt paying part is the reason the deposits are in Swiss banks, Indian government needs to develop a scheme where it can be brought back and they would get something and people would not be punished and everything would be confidential, a hard task but for 1.4 TRILLION dollars well worth it.
     
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  18. johnee

    johnee Elite Member Elite Member

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    yes. ppl must feel that THEIR money will still stay and they wont be punished at the same time they must also feel that if they dont bring that money back they might lose all their money. then it will work.
    may be govt should slyly spread a rumour that swiss are going bankrupt and hence are going to use the black money in coffers to bail themselves out which is most probably going to fail, so the money is lost. then govt comes ahead and says, we dont want our countrymen to lose their money so they can get back their money. of course, there would be 'small' duty on it.

    I think this economic recession is the right time to bring that money back to india. that money would make hell of a difference to our entire economy.
     
  19. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    nice idea even 5-7% duty could mean 100 BILLION dollars for indian government.
     
  20. Sabir

    Sabir DFI TEAM Senior Member

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    If we can recover the black money from Swiss Banks what change it will make.........

    Any estimation of the amount?.....yes....no....nothing ...authentic actually...but it's huge.

    Any effort to bring it back?....yes...opposition parties are raising voice...Pranab Babu was also saying....they are talking with Swiss authority.....Let's hope..

    Is Swiss authority is yielding?......yes..yes...there are pressure on them ...specially from America....

    What difference it will make if we can recover it?........You say.
     
  21. Yusuf

    Yusuf GUARDIAN Administrator

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    A couple of trillions is what I heard. That's double the size of indian economy. All infrastructure problens can be resolved with that. Roads, airports, ports and power.
     
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