I read an article in 'The Indian Economy Blog' titled "How Nehru and Shastri made Dubai Rich". It was about two years back and generated a lot of discussion on how our socialist regulations resulted in smuggling of gold from Dubai and other Gulf countries. Similarly, MRTP and FERA Acts also have done heavy damage to Indian economy. There is no correct estimate of the extent of capital moved out of India by businessmen and politicians. However, a few studies by some retired government officials and Swiss Bank reports give us a fair idea.
Recently Mr. K.V.M. Pai a former Chief Commissioner of Income tax, Mumbai delivered a few lectures organised by the Forum Of Free Enterprise on the topic 'Black Money Menace in India time for Action'. In his lecture he quoted a Swiss Bank Report 2006 which deals with deposits held by individuals from different countries in Switzerland. It is not surprising that India topped the list with $1456 billion in deposits which was more than the total deposits by the citizens of all other countries put together in Swiss banks. Who says India is poor? (Perhaps India is still poor where as rich Indians support the Swiss financial system by providing all the necessary funds!)
Mr. Pai in his talk argued that the amount deposited in Swiss Banks by Indians is about 13 times larger than the country's foreign debt in 2006. Once this huge black money comes back to India, the entire foreign debt can be repaid in 24 hours!According to Mr. Pai "It is one of the largest loots witnessed by mankind in entire economic history of the world since 1947."
Secret Banking in Switzerland
Secret banking in Switzerland is not a new phenomenon. It dates back to 1713 when the Council of Geneva passed a law preventing banks sharing information about their clients. In the 1930s France and Germany tried to change this rule to prevent flight of capital. The Swiss responded with a new law which made releasing of client information a crime. The other factor encouraged people to deposit money in Swiss Banks was the political stability. At present it is estimated that the Swiss Banks hold about 7 trillion in private deposits. The Swiss laws make it a crime to release the name of an account holder. The only exception is when a particular client is suspected of evading tax authorities in a country and the client is given an opportunity to answer to Swiss authorities. We have the 'Saga of the Bofors case' involving a former prime minister of India.
The Swiss Banks are in the news recently for a slightly different reason. The American Internal Revenue Service(IRS) filed a civic suit in a US District Court in Miami to force the largest Swiss Bank, UBS to reveal the identities of some American citizens who have secret Swiss Bank accounts. The UBS was forced to release about 250 names out of about 52000 Americans allegedly holding secret accounts in these banks. It has a tremendous long term impact on the Swiss Banking System. In the future it may be difficult for a Swiss banker to promise ultimate secrecy in bank accounts to clients.
Since the Americans and Europeans have a strong network of intelligence on the revenue side tax evasion is comparatively lesser than in developing economies of Asia and Africa.
The high marginal tax rates combined with notorious foreign exchange rules in India resulted in Indians (both businesmen and politicians) siphoning massive amounts of money from India. It is said that a major part of such deposits of politicians or military rulers in the tax havens are unclaimed since the depositors are either in jail or were killed in military coup. The unaccounted wealth is amassed using wrong means and many account holders have not provided nominees for their bank accounts.
A recent study by Wharton Faculty on secret bank accounts found that Switzerland leads with such deposits ($2.0 trillion) followed by UK and Channel islands($1.4 )and Luxemberg($800 billion). The other destinations for unaccounted money are Bahamas and Bermuda ($700 billion), US($600 bn), Singapore($550bn), Hongkong ($350bn) etc. Many Indian businessmen and politicians are believed to have large bank deposits and investments in all these places.
When millions of Indians live in miserable conditions and the government pleads lack of funds as an excuse for not investing enough in education and infrastructure, our rich and corrupt continue to enrich foreign nations!
Happy Winter Solstice
-
Today – December 21, 2024 – marks the winter solstice in the northern
hemisphere. It was precisely at 1:21 a.m. Pacific time (9:21 a.m. UTC —
Coordinated U...
1 day ago