Monday, 28 November 2016

War on Indian Assets abroad

Prime Minister Narendra Modi hasn't wasted much time to make it a priority to recover billions of dollars stashed overseas to avoid taxes.

Indians had moved $644 billion to tax havens as of 2011, according to data from Global Financial Integrity.

Although India has  step up efforts to trace Indians' Swiss account details Many of those are suspected to have maintained accounts in Swiss banks through offshore entities, including in Panama and British Virgin Islands. 
A total amount of Rs 4,147 crore was declared during the 90-day black money compliance window, higher than the previously announced amount of Rs 3,770 crore.

Two years back India 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, according to Kumar, who analysed 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 in the South Asian nation or disclosing the funds to authorities.

Although there is no exact estimate of total money in these accounts as of date even let us take a figure of $400 billion. If government is successful in getting back the same there shall be negatives and positives of the move.

It shall be equal to almost one year budget of government and shall be difficult to spend the same with speed. The liquidity shall result in higher inflation and surge in real estate prices.

However the same money can be used for

  • India can pay off entire foreign debt and can remove tax on income
  • Infrastructure
  • Highways
  • Smart cities 
  • More airports 
  • Railways 
  • Pan India cooking gas pipeline 
  • High speed wifi 
  • Infrastructure even to remote villages 
  • Clean drinking water
  • More hospitals like AIIMS

Although India shall be able to get information by 2018 under Automatic Exchange treaty with Switzerland, we know the money shall either be moved to other tax havens like UK or moved back to India through other routes.

In addition to this, the terminological framework of ‘black money’ possesses a great deal of ambiguity. What constitutes black money for the Indian government is likely to be different for Swiss banking regulators and Swiss banks. If foreign income is legally being declared in a Swiss bank, is it ‘black money’? If income is earned in India by a company in the Cayman Islands who owns an account in Switzerland, is it ‘black money’? Swiss officials and bankers have committed to cooperate with Indian officials in probing for money laundering, but if ‘black money’ is being put in Swiss accounts under the prepense of legal business operations, is it money laundering or just offshoring of funds? 

The demonetisation drive has forced hawala operators to find new ways to turn black money into white, especially in the Gulf region.

The modus operandi: An NRI gives 3,500 dirhams to a hawala agent. The former gets `1.5 lakh in India, albeit in the scrapped `500 and `1,000 notes. The present exchange rate of 3,500 dirhams is around `64,000, doubling the profit. As the amount is below `2.5 lakh, no queries will be made

I understand our government respects the view of common citizen and invites proposal for better governance.

I am obliged to PMO for considering my proposal and the bill tabled for the same today

 “The Taxation Laws (Second Amendment) Bill, 2016, proposes to make some changes in the Act to ensure that defaulting assesses are subjected to tax at a higher rate and stringent penalty provision,” finance minister Arun Jaitley said in the Bill that he moved for passage in Parliament. 

In addition to tax surcharge and penalty, the declarant shall have to deposit 25 percent of undisclosed income in a welfare programme—the 'Pradhan Mantri Garib Kalyan Deposit Scheme, 2016'. 

This amount will be locked a four-year lock-in period. “The deposit shall bear no interest and the amount deposited shall be allowed to be withdrawn after four years from the date of deposit and shall also fulfil such other conditions as may be specified in the Pradhan Mantri Garib Kalyan Deposit Scheme, 2016,” the Bill specified.
If PMO extends the same proposal to money parked abroad under this scheme with same rate or slightly higher it might help to get these funds at much less administrative cost.

We may argue that the scheme was open earlier but not with much success. However now there is fear psychosis amongst money hoarders as they know Mr Prime Minister shall not hesitate to take any harsh steps.

To add the proposal if considered with due corrections should be rolled out at the earliest. As we have seen that the current bill passed 20 days after demonetisation. Half of black money must have already exchanged hands.

I am writing as a proud and dedicated Indian who wants to see India at top under strong leadership.

I again appreciate the gesture of PMO to listen to the voice of Social media and ordinary citizens


  1. Well written. Thanks a lot for the precise and to-the-point explanations.

  2. after a long period...
    a man one who came to work on public interest.

  3. Efforts by our PM will certainly make people think twice before hoarding black money...