Money laundering and Tax havens
By Gopal K Agarwal,
IN my childhood I read "India
is a rich country inhabited by the poor. This statement always pricked my
consciousness, and when I read India's Planned Poverty by Shri Daya Krishna, I
was filled with self-pity. My conclusion is that corruption is the root cause
of India's poverty.
The recent discussion on bringing
back the Indians' black money stashed away in Swiss banks will give right
stimulus and direction to the debate. Any commitment on the issue by political
parties will be a clear message to the masses about their resolve to fight this
menace. BJP's prime ministerial candidate Shri LK Advani's vow to bring back
this money to the country is a welcome move.
In 2006, the revealed Global Financial
Integrity Studies, developing countries lost an estimated Rs 43 lakh crore to
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 per cent over the five-year
period, analysed by the study. On an average, during the five year period of
this study,
Asia accounts for approximately 50
per cent of overall illicit financial flows from all developing countries.
Our people stashed away the money in
these tax havens over the last 60 years. What is to be noted here is the fact
that most of the wealth of Indians parked in these tax havens is illegitimate
money acquired through corrupt means Naturally, the secrecy associated with the
bank accounts in such places is central to the issue and not their low tax
rates as the term 'tax havens' suggests.
Along with this phenomenon. If we
put together some other related past events that took place in the country, we
will come to know the modus operandi of the people involved and understand how
the country was taken for a ride during the current regime. A route was needed
to bring this money back through subverting the domestic laws and tax evasion.
A unique operation was planned in the form of security transaction tax (STT) in
place of capital gains tax.
This black money parked in foreign
tax havens was routed through participatory notes and FIIs in Indian capital
market. The Indian market got highly buoyed and saw unprecedented rise due to
large sum of money chasing equity. The Indian counterparts of these very
entities sold their holdings at a very high premium and thereby made huge capital
gains on Indian bourses. With the removal of capital gains tax and introduction
of STT. this group was able to bring back large amount of black money stashed
outside the country and converted it into white without paying capital gains
tax and paying little to the government in the form of securities transaction
tax. The STT was introduced in the country, although it is detrimental to the
Indian capital market. It has completely killed the liquidity and is instrumental
in the extreme volatility in the market. All market participants had openly
opposed it including National Stock Exchange of India and market regulator,
SEBI.
Still we have lot of money stashed
away, in foreign countries. We need to bring it back as is being done by
crisis-laden Western powers, led by the United States. These countries have
embarked upon a mission to force Swiss banks and other offshore tax havens to
put an end to banking secrecy and bring back their tax-evading citizens' hidden
wealth. Swiss Banking Association report, 2006 gives details of the bank
deposits in the territory of Switzerland by nationals of following top five
countries: India $1,456 billion, Russia $470 billion, UK $390 billion. Ukraine
100 billion and China $96 billion. India with $1456 billion has more money in
Swiss banks than rest of the world combined. This bank deposit is about 13
times larger than the country's foreign debt. With this amount, 45 crore poor
people can get Rs 1,00,000 each. This huge amount has been amassed from the
people of India by exploiting and betraying them. Once this huge amount of
black money comes back to India, the entire foreign debt can be repaid, and
still we will have surplus amount, almost 12 times larger. If this surplus
amount is invested in earning interest, the amount of interest will be more
than the annual budget of the central government. Backwardness in our infrastructure,
agriculture and other sectors can all be corrected using this money.
Gopal Krishna Agarwal is the National spokesperson of the Bharatiya Janata Party on economic affairs.
