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KNOW INDIAN BLACK MONEY

What is black money?
Black money is known by various names, such as black economy, parallel
economy, underground economy, subterranean economy, unaccounted economy,
and unobserved economy.
1. Definitions
THE definitions range from a restricted one involving the quantum of tax revenue
to a wide one covering all economic activities which, because of accounting
conventions, non-reporting or under-reporting, escapes the GNP system of
accounts or other social measures. The existing literature on the subject is
sometimes bedevilled by the careless use of concepts. A basic source of the
problem is the failure to distinguish between what the economists call flows and
stocks. There is the flow of black income, that is, the income which is earned in
the process of evading indirect taxes and/or the part of income, however earned,
which is not declared for direct taxes, on the one hand, and there is also the black
wealth, a stock, that arises from the cumulation of the savings out of black
income, on the other.
The Board of Internal Revenue (UK) defines black money as economic activity
generating income which is concealed from the revenue collecting authorities with
the intention of evading tax. The Central Statistical Organisation (UK)
characterises the phenomenon as activities that are not reported in the national
income accounts. Unreported activity has been defined as the activity that
generates factor income which cannot be estimated from the regular statistical
sources used to compile the income measures of gross domestic product, observed
Makafee*. Feige* also considered unaccounted economy (unobserved economy)
as those economic activities that go unreported or are unmeasured by the societys
current techniques for monitoring economic activity. Another definition in the
same vein has been offered by Tanzi*: it is gross national product that because of
unreporting and/or under-reporting is not measured by official statistics

Black money arises mainly from incomes not disclosed to the government usually
to avoid taxation, and, sometimes, because of its criminal links. In India, Black
money refers to funds earned on the black market, on which income and other
taxes have not been paid. The total amount of black money deposited in foreign
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banks by Indians is unknown. Some reports claim a total exceeding US$1.4 trillion
are stashed in Switzerland. Other reports, including those reported by Swiss
Bankers Association and the Government of Switzerland, claim that these reports
are false and fabricated, and the total amount held in all Swiss banks by citizens of
India is about US$2 billion

Size of India's black economy
In 2011, the government had commissioned a joint study by three think-tanks -
NIPFP, NIFM and NCAER - to estimate Indian entities' unaccounted wealth both
at home and abroad. The final report has not been submitted.
India ranked fifth largest exporter of illicit money between 2002-2011, with a total
of $343.04 billion, and in 2011 it was placed third when $84.93 billion was sent
abroad, according to a 2013 report titled 'Illicit Financial Flows from Developing
Countries: 2002-2011'
According to Global Financial Integrity (GFI), a Washington-based think-tank,
Indians salted away $462 billion (about Rs. 28 lakh crore in current exchange
rates) in overseas tax havens between 1948-2008
As per Swiss National Bank's latest data, the total money held by Indians in Swiss
banks stood at over Rs. 14,000 crore as on December 2013, up by nearly 42% from
a year ago
The capital outflows stem from crime, corruption, tax evasion, and other illicit
activity.
Illicit Financial Flows from Developing Countries: 2002-2011

This December 2013 report from Global Financial Integrity, Illicit Financial
Flows from the Developing World: 2002-2011, finds that the developing world
lost US$5.9 trillion in illicit financial flows from 2002-2011, with illicit outflows
alarmingly increasing at an average rate of more than 10 percent per year.
The report is the fourth update of Global Financial Integritys groundbreaking
report, Illicit Financial Flows from Developing Countries 2002-2006. For the first
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time, this years report incorporates re-exporting data from Hong Kong and uses
disaggregatedas opposed to aggregatedbilateral trade data for those countries
which report it.

The report finds that from 2002 to 2011, developing countries lost US$5.9 trillion
to illicit outflows. The outflows increased at an average inflation-adjusted rate of
10.2% per year over the decadesignificantly outpacing GDP growth.
As a percentage of GDP, Sub-Saharan Africa suffered the biggest loss of illicit
capital. Illicit outflows from the region averaged 5.7% of GDP annually. Globally,
illicit financial outflows averaged 4% of GDP.

China leads the world over the 10-year period with US$1.08 trillion in illicit
outflows. However, 2011 marked the first time that Russias illicit outflows
exceeded Chinas, with a loss of US$191.14 billion against Chinas US$151.35
billion. The previous methodology had significantly understated Russias illicit
outflows, while it overstated Chinas illicit outflows.
Report Findings Include:

Developing countries lost US$946.7 billion in illicit outflows in 2011, an
increase of 13.7% over the US$832.4
billion that flowed out of developing countries in 2010. The 2011 outflows are the
highest on record over the decade.
Developing countries lost US$590.0 billion per annum on average through
illicit outflows over the decade
ending 2011. Cumulatively, developing countries lost US$5.9 trillion to illicit
outflows between 2002 and 2011.
Adjusted for inflation, illicit financial flows grew by an annual rate of 10.2%.
Outflows grew every year studied,
slowing only briefly at the onset of the global financial crisis toward the end of the
decade.
Illicit financial flows have increased in every region of the developing world.
Adjusted for inflation, annual illicit
financial flow growth by region over the decade was:
Middle East and North Africa (MENA) ............................................. 31.5%
Sub-Saharan Africa (Africa) ............................................................ 20.2%
Developing Europe .......................................................................... 13.6%
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Asia ................................................................................................... 7.5%
Western Hemisphere ........................................................................ 3.1%

Asia accounted for 39.6% of total illicit flows from the developing world
followed by developing Europe (21.5%),
the Western Hemisphere (19.6%), the Middle East and North Africa (11.2%), and
Sub-Saharan Africa (7.7%).
Illicit outflows averaged roughly 4.0% of GDP per year from all developing
countries over the decade. As a percent
of GDP, Sub-Saharan Africa had the biggest problemwith average annual
illicit outflows totaling 5.7% of
GDPfollowed by developing Europe (4.5%), Asia (4.1%), MENA (3.5%), and
the Western Hemisphere (3.5%).
New Methodology
Last year, Global Financial Integrity debuted several important revisions to its
HMN (Hot Money Narrow) methodology for calculating illicit financial flows.
This report continues to revise GFIs methodology by making significant changes
to how it calculates GER (Gross Excluding Reversals) to estimate trade
misinvoicing.
For the first time, this years report incorporates re-exporting data from Hong
Kong and uses disaggregatedas opposed to aggregatedbilateral trade data for
those countries which report it. The authors of this report believe that GFIs
previous methodologywhich was accepted by most economists studying trade
misinvoicingresulted in an estimate that potentially overstated illicit outflows
from many Asian countries and understated illicit outflows from other countries.
Post-revision, the authors believe they have produced the most accurate estimate of
global illicit financial outflows produced by GFI to date.
.
Country Rankings
The Top 25 countries with the highest measured cumulative illicit financial
outflows between 2002 and 2011 were:
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Rank Country Illicit Outflows Rank Country Illicit Outflows
1. China: US$1.08tn 14. Philippines: US$88.87bn
2. Russia: US$880.96bn 15. Costa Rica: US$80.65bn
3. Mexico: US$461.86bn 16. Belarus: US$75.09bn
4. Malaysia: US$370.38bn 17. Qatar: US$62.82bn
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5. India: US$343.93bn 18. Poland: US$49.39bn
6. Saudi Arabia: US$266.43bn 19. Serbia: US$49.37bn
7. Brazil: US$192.69bn 20. Chile: US$45.20bn
8. Indonesia: US$181.83bn 21. Paraguay: US$40.12bn
9. Iraq: US$78.79bn
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22. Venezuela: US$38.97bn
10. Nigeria: US$142.27bn 23. Brunei: US$38.37bn
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11. Thailand: US$140.88bn 24. Panama: US$38.09bn
12.
United Arab
Emirates:
US$114.64bn
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25. Turkey: US$37.28bn
13. South Africa:
US$100.73bn

Footnotes
1. Data for Iraq was not available in 2002-2006, thus the average illicit
outflows of US$15.76 billion reflect only the years 2007-2011. Likewise,
the cumulative outflows of US$78.79 billion for Iraq are cumulative
outflows for 2007 through 2011 only.
2. Illicit financial outflow estimates from the oil exporting nations of Brunei,
Qatar, and the United Arab Emirates should be viewed with caution as they
could be inflated due to opaque transactions with their nations sovereign
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wealth funds. GFI has flagged these countries in particular as their Net
Errors and Omissions are greater than 50% of their Financial Account


Sources:
http://gfintegrity.org/wp-
content/uploads/2014/05/Illicit_Financial_Flows_from_Developing_Countries_20
02-2011-HighRes.pdf

http://iff.gfintegrity.org/iff2013/country_data-
illicit_financial_flows_from_developing_countries_2002-2011.pdf




Double taxation agreements
Double taxation is the levying of tax by two or more jurisdictions on the same
declared income (in the case of income taxes), asset(in the case of capital
taxes), or financial transaction (in the case of sales taxes). This double liability
is often mitigated by treaties between countries.
The term 'double taxation' is additionally used, particularly in the USA, to refer to
the fact that corporate profits are taxed and the shareholders of the corporation are
(usually) subject to personal taxation when they receive dividends or distributions
of those profits.
India has comprehensive Double Taxation Avoidance Agreements (DTAA ) with
88(signed 88 DTAAs out of which 85 have entered into force) countries. This
means that there are agreed rates of tax and jurisdiction on specified types of
income arising in a country to a tax resident of another country. Under the Income
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Tax Act 1961 of India, there are two provisions, Section 90 and Section 91, which
provide specific relief to taxpayers to save them from double taxation. Section 90
is for taxpayers who have paid the tax to a country with which India has signed
DTAA, while Section 91 provides relief to tax payers who have paid tax to a
country with which India has not signed a DTAA. Thus, India gives relief to both
kind of taxpayer.
A large number of foreign institutional investors who trade on the Indian stock
markets operate from Singapore and the second being Marutius. According to
the treaty between India and Mauritius, capital gains arising from the sale of shares
are taxable in the country of residence of the shareholder and not in the country of
residence of the company whose shares have been sold. Therefore, a company
resident in Mauritius selling shares of an Indian company will not pay tax in India.
Since there is no capital gains tax in Mauritius, the gain will escape tax altogether.
The Indian and Cypriot tax treaty is the only other such Indian treaty to provide for
the same beneficial treatment of capital gains.
Interestingly, Singapores investment of $5.98 billion has over taken Mauritiuss
investment of $4.85 billion as the single largest investor for the year 2013-14.
Swiss Banking Act of 1934

Bank secrecy was codified in Switzerland by the 1934 Federal Act on Banks and
Savings Banks (Swiss Banking Act of 1934) following a public scandal in France,
when MP Fabien Alberty denounced tax evasion by eminent French personalities,
including politicians, judges, industrialists, church dignitaries and directors of
newspapers, who were hiding their money in Switzerland. He called these men of
"a particularly ticklish patriotism", who "probably are unaware that the money they
deposit abroad is lent by Switzerland to Germany". The Peugeot brothers and
Franois Coty, of the famous perfume family, were on his list. Since then, Swiss
banks have acquired worldwide celebrity due to their numbered bank accounts,
which critics such as ATTAC NGO alleged only help legalized tax evasion, money
laundering and more generally the underground economy.
Under the Swiss principle of bank secrecy, privacy is statutorily enforced, with
Swiss law strictly limiting any information shared with third parties, including tax
authorities, foreign governments or even Swiss authorities, except when requested
by a Swiss judge's .banking is not strictly anonymous since under its banking law
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all Swiss bank accounts, including numbered bank accounts, are linked to an
identified individual. This law only permits a bank to share information with others
in cases of severe criminal acts, such as identifying a terrorist's bank account or tax
fraud, but not simple non-reporting of taxable income (called tax evasion in
Switzerland). In April 2013, French Minister Jrme Cahuzac was forced to resign
when the Geneva public prosecutor, acting quickly on a French request related to
tax fraud, found evidence of undeclared Swiss accounts.
Under pressure from the G20 and the OECD, the Swiss government announced in
March 2009 that it will abolish the distinction between tax fraud and tax evasion in
dealings with foreign clients. The distinction remains valid for domestic clients.
Any bank employee violating a client's privacy could be punished quite severely
by law. After signing 12 new double taxation treaties in accordance with the
international standard set by the OECD, Switzerland was removed from the grey
list of non-compliant tax jurisdictions.
In October 2013, the Swiss government stated that it intended to sign an
international agreement sponsored by the OECD that, if ratified by Parliament, will
align Swiss bank practices with those of other countries and in effect end the
special secrecy that clients of Swiss banks had enjoyed in the past.
After the revelations of whistleblower Bradley Birkenfeld in 2007, UBS was
caught red-handed by the United States government offering tax evasion strategies,
sending undercover bankers with encrypted computers to the United States. After it
was caught, UBS paid a $780 million penalty and handed over hundreds of client
files to American authorities. In 2010, the Swiss and the United States
governments negotiated an agreement allowing Swiss bank UBS to transmit to the
US authorities information concerning 4,450 American clients of UBS suspected
of tax evasion.
In the aftermath of the UBS and Julius Baer banking cases, some wealthy clients
who continue to use offshore accounts are turning to private banks in Singapore
and Hong Kong. In addition to the local Singapore or Hong Kong banks, offices
have been opened in those localities by a number of Swiss private banks. The
move to Singapore and Hong Kong is an alternative to the banking secrecy that
Swiss banks have come under attack for. Singapore has bank secrecy provisions
comparable to those in Switzerland. Although Hong Kong does not have the same
bank privacy laws, it offers flexibility in the creation of opaque companies that can
serve as tax conduits.
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Many offshore banks, located in tax havens such as in the Cayman Islands and
Panama, also have strict privacy laws
Tax evasion and money laundering
Jurisdiction with what other countries view are excessive protections benefitting
dubious parties are sometimes known as secrecy havens, by analogy with tax
havens.
Numbered bank accounts, used by Swiss banks and other offshore banks located in
tax havens, have been accused by NGOs such as ATTAC of being a major
instrument of the underground economy, facilitating tax evasion and money
laundering. After Al Capone's 1931 condemnation for tax evasion, according to
journalist Lucy Komisar
mobster Meyer Lansky took money from New Orleans slot machines and shifted it
to accounts overseas. The Swiss secrecy law two years later assured him of G-
man-proof-banking. Later, he bought a Swiss bank and for years deposited his
Havana casino take in Miami accounts, then wired the funds to Switzerland via a
network of shell and holding companies and offshore accounts
Joseph Stiglitz, 2001 Nobel laureate for economics, told Komisar:
You ask why, if there's an important role for a regulated banking system, do you
allow a non-regulated banking system to continue? It's in the interest of some of
the moneyed interests to allow this to occur. It's not an accident; it could have been
shut down at any time. If you said the US, the UK, the major G7 banks will not
deal with offshore bank centers that don't comply with G7 banks regulations, these
banks could not exist. They only exist because they engage in transactions with
standard banks.
In 1999, a class action suit against the Vatican Bank criticized the role of
Switzerland during World War II
Also in 1999, according to Lucy Komisar, banks "orchestrated a successful e-mail
campaign to Congress" to "sink a 'know your customer' regulation proposed by the
Federal Deposit Insurance Corporation".
In 2001, the United States learned that the Swiss had protected the bank that
handled finances for Osama Bin Laden. One of them, the Bahrain International
Bank, had funds transiting through non-published accounts of Clearstream, which
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has been qualified as a "bank of banks" and was involved in one of Luxembourg's
major financial scandals.
Taxation in Switzerland

taxes in Switzerland are levied by the Swiss Confederation, the cantons and the
municipalities. Switzerland is sometimes considered a tax haven due to its general
low rate of taxation, its political stability as well as the various tax exemptions or
reductions available to Swiss companies doing business abroad, or foreign persons
residing in Switzerland
Black money in Swiss banks
In early 2011, several reports Indian media alleged Swiss Bankers Association
officials to have said that the largest depositors of illegal foreign money in
Switzerland are Indian These allegations were later denied by Swiss Bankers
Association as well as the central bank of Switzerland that tracks total deposits
held in Switzerland by Swiss and non-Swiss citizens, and by wealth managers
as fudiciaries of non-Swiss citizens.
James Nason of Swiss Bankers Association in an interview about alleged black
money from India, suggests "The (black money) figures were rapidly picked up in
the Indian media and in Indian opposition circles, and circulated as gospel truth.
However, this story was a complete fabrication. The Swiss Bankers Association
never said or published such a report. Anyone claiming to have such figures (for
India) should be forced to identify their source and explain the methodology used
to produce them."
Supreme Court on black money
Noted jurist and former law minister Ram Jethmalani along with many other well
known citizens filed a Writ Petition (Civil) No. 176 of 2009 in the Supreme Court
of India seeking the court's directions to help bring back black money stashed
in tax havens abroad and initiate efforts to strengthen the governance framework to
prevent further creation of black money.
In January 2011, the (SC) asked why the names of those who have stashed money
in the Liechtenstein Bank have not been disclosed. The court argued that the
government should be more forthcoming in releasing all available information on
what it called a "mind-boggling" amount of money that is believed to be held
illegally in foreign banks.
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The SC on 4 July 2011, ordered the appointment of a Special Investigating Team
(SIT) headed by former SC judge BP Jeevan Reddy to act as a watch dog and
monitor investigations dealing with the black money. This body would report to
the SC directly and no other agency will be involved in this. The two judge bench
observed that the failure of the government to control the phenomenon of black
money is an indication of weakness and softness of the government.
The issue of unaccounted monies held by nationals, and other legal entities, in
foreign banks, is of primordial importance to the welfare of the citizens. The
quantum of such monies may be rough indicators of the weakness of the State, in
terms of both crime prevention, and also of tax collection. Depending on the
volume of such monies, and the number of incidents through which such monies
are generated and secreted away, it may very well reveal the degree of "softness of
the State."
Justice B Sudershan Reddy and Justice S S Nijjar, Supreme Court of India,
Source:
The government subsequently challenged this order through Interlocutory
Application No. 8 of 2011. The bench (consisting of Justice Altamas Kabir in place
of Justice B Sudershan Reddy, since Justice Reddy retired) on 23 September 2011
pronounced a split verdict on whether government plea is maintainable.
Justice Kabir said that the plea is maintainable while Justice Nijjar said it is not.
Due to this split verdict, the matter will be referred to a third judge.
In April 2014, Indian Government disclosed to the Supreme Court the names of 26
people who had accounts in banks in Liechtenstein, as revealed to India by German
authorities. On 27 October 2014, Indian Government submitted name of three
people in an affidavit to the Supreme Court who have black money account in
foreign countries. But on the very next day, Supreme Court of India orders centre
Government to reveal all the names of black money account holders which they
had received from various countries like Germany. The honorable bench of the
Supreme court also asked the Centre not to indulge in any kind of probe rather just
pass the names to them and Supreme court will pass the order for further probe.
Following the order, Government of India submitted the names of 627 people in
the Supreme Court of India in a sealed envelope on 29 October 2014.
Hasan Ali case
Hasan Ali Khan was arrested by Enforcement Directorate and the Income Tax
Department on charges of stashing over 360 billion in foreign banks. ED lawyers
said Khan had financed international arms dealer Adnan Khashoggi on several
occasions.
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However, media sources claimed this case is becoming yet another perfect instance
of how investigative agencies like Income Tax Department go soft on high-profile
offenders. Ali's premises were raided by ED as far back as 2007. According several
news reports, the probe against him has proceeded at an extremely slow pace and
seems to have hit a dead end.
India Today claimed that it had verified a letter confirming the US$8 billion in
black money was in a Swiss bank UBS account, and the government of India too
has verified this with UBS. The Swiss bank UBS has denied Indian media reports
alleging that it maintained a business relationship with or had any assets or
accounts for Hasan Ali Khan accused in the US$8 billion black money case. Upon
formal request by Indian and Swiss government authorities, the bank announced
that the documentation supposedly corroborating such allegations were forged, and
numerous media reports claiming US$8 billion in stashed black money were
false. India Today, in a later article, wrote, "Hasan Ali Khan stands accused of
massive tax evasion and stashing money in secret bank accounts abroad. But the
problem is that the law enforcement agencies have precious little evidence to back
their claims. For one, UBS Zurich has already denied having any dealings with
Khan."
Estimates of Indian black money
As Schneider estimates, using the dynamic multiple-indicators multiple-causes
method and by currency demand method, that the size of India's black money
economy is between 23 to 26%, compared to an Asia-wide average of 28 to 30%,
to an Africa-wide average to 41 to 44%, and to a Latin America-wide average of
41 to 44% of respective gross domestic products. According to this study, the
average size of the shadow economy (as a percent of "official" GDP) in 96
developing countries is 38.7%, with India below average.
Public protests and government's response
In May 2012, the Government of India published a white paper on black money. It
disclosed India's effort at addressing black money and guidelines to prevent black
money in the future
India has following institutions already preventing, finding and investigating
underground economy and black money
Swami Ramdev, popular as Baba Ramdev is a Hindu swami and a yoga guru. He is
a social activist and has staged protests against corruption in the country. He has
been associated with the 2011 Indian anti-corruption movement and also started his
Bharat Swabhiman first phase Yatra with the pledge of disease free India and
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simultaneously to eradicate corruption and bring back black money from the
birthplace of Sri Krishna, Dwarika Gujrat on 2 September 2010. This yatra has
been through 25 states of India like rajasthan, Jammu Kashmir, Himachal Pradesh,
Haryana, Uttar Pardesh, Jharkhand, Chhattisgarh, Orrisa, Assam West Bengal,
Maharashta, Meghalaya and ends at the city of Mahakal Ujjain. On 20 September
Swami Ramdev had started second phase of his yatra from the fort of Jhansi. More
than 1 lakh people of Jhansi city had taken pledge to fight against corruption. On
30 January 2011, a written representation of people from over 600 districts was
sent to the Prime Minister which contained demand of bringing back black money
stashed abroad & putting an end to corruption, which was supported by all major
social, spiritual groups and organizations of the nation. Ramdev himself sent the
signed representation to the President of India through the District Magistrate of
Bilaspur. Soon after on 27th Feb, 2011 he, organized a huge rally in Ramlila
Maidan, Delhi which was attended by lakhs of people after which a written
representation was handed over to the President to bring back black money, on the
day which marks the birth anniversary of freedom fighter Shaheed Chandrasekhar
Azad. Central Board of Direct Taxes: is a statutory authority functioning across
India under the Central Board of Revenue Act of 1963. The Member(Investigation)
of the CBDT,exercises control over the Investigation Division of the Central Board
of Direct Taxes.The Member is a high ranking IRS officer of the rank of Special
Secretary to the Government of India.The Member controls the:
Chief Commissioner of Income Tax Central.
Directorate General of Income Tax Investigation
Directorate of Income Tax Intelligence and Criminal Investigation.
The Director General of Income Tax (International Taxation) is in charge of
taxation issues arising from cross-border transactions and transfer pricing. This
organisation has been in operation for nearly 50 years, is primarily responsible for
combating the menace of black money, has offices in more than 800 buildings
spread over 510 cities and towns across India and has over 55,000 employees and
even employees who are deputed from premier police organisations to aid the
department.
Enforcement Directorate: was established in 1956. It administers the provisions
of the Foreign Exchange Regulation Act of 1973 (FERA), later updated to Foreign
Exchange Management Act of 1999 (FEMA). It is entrusted with the investigation
and prosecution of money-laundering offences, confiscation of the proceeds of
such crime, matters related to foreign exchange market and
international hawala transactions. This India-wide directorate, with focus on major
financial centres in India, has 39 offices and 2000 employees.
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Financial Intelligence Unit: has been operating as a separate investigative entity
since 2004. This government organisation for receiving, processing, analysing, and
disseminating information relating to suspect financial transactions. It shares this
information with other ministries, enforcement and financial investigative agencies
of state and central government of India. Every month, it routinely examines about
700,000 investigative reports and over 1,000 suspect financial transaction trails to
help identify and stop black money and money laundering.
Central Board of Excise and Customs and Directorate of Revenue
Intelligence: is the apex intelligence organisation responsible for detecting cases
of evasion of central excise and service tax. The Directorate develops intelligence,
especially in new areas of tax evasion through its intelligence network across the
country and disseminates information across Indian government organisations by
issuing Modus Operandi Circulars and Alert Circulars to apprise field formations
of the latest trends in tax evasion. It routinely arranges for enforcement operations
to research into the evasion of duty and taxes. The Directorate of Revenue
Intelligence functions under the CBEC. It is entrusted with the responsibility of
collection of data and information and its analysis, collation, interpretation and
dissemination on matters relating to violations of taxation and customs law. The
organisation has thousands of employees and is divided into seven zones all over
India. It maintains close liaison with the World Customs Organisation, Brussels,
the Regional Intelligence Liaison Office at Tokyo, INTERPOL, and foreign
customs administrations.
Central Economic Intelligence Bureau: functions under India's Ministry of
Finance. It is responsible for coordination, intelligence sharing, and investigations
at national as well as regional levels amongst various law enforcement agencies to
prevent financial crimes, generation and parking of black money and illegal
transfers. This organisation maintains constant interaction with its Customs
Overseas Investigation Network (COIN) offices to share intelligence and
information on suspected international financial transactions. The COIN offices
gather evidence through diplomatic channels from the foreign custom offices and
other foreign establishments to establish cases of mis-declaration to help identify
and stop tax evasion and money laundering.
In addition to the primary agencies listed above, India has 10 additional separate
departments operating under the central government of India - such as National
Investigation Agency and National Crimes Record Bureau - to help locate,
investigate and prosecute black money cases. Discovery and enforcement is also
assisted by India's Central Bureau of Investigation and state police.
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In addition to direct efforts, the Indian central government coordinates its efforts
with state governments with dedicated departments to monitor and stop corporate
frauds, bank frauds, frauds by non-banking financial companies, sales tax frauds
and income tax-related frauds.
MC Joshi committee on black money
After a series of ongoing demonstrations and protests across India, the government
appointed a high-level committee headed by MC Joshi (the then CBDT Chairman)
in June 2011 to study the generation and curbing of black money. The committee
finalised its draft report on 30 January 2012. Its key observation and
recommendations were:
1. The two major national parties (an apparent reference to Indian National
Congress, BJP) claim to have incomes of merely 5 billion (US$81 million)
and 2 billion (US$32 million). But this isn't "even a fraction" of their
expenses. These parties spend between 100 billion (US$1.6 billion) and
150 billion (US$2.4 billion) annually on election expenses alone.
2. Change maximum punishment under Prevention of Corruption Act from the
present 3, 5 and 7 years to 2, 7 and 10 years rigorous imprisonment and also
changes in the years of punishment in the Income Tax Act.
3. Taxation is a highly specialised subject. Based on domain knowledge, set up
all-India judicial service and a National Tax Tribunal.
4. Just as the USA Patriot Act under which global financial transactions above
a threshold limit (by or with Americans) get reported to law enforcement
agencies, India should insist on entities operating in India to report all
global financial transactions above a threshold limit
5. Consider introducing an amnesty scheme with reduced penalties and
immunity from prosecution to the people who bring back black money from
abroad.
Tax Information Exchange Agreements
To curb black money, India has signed TIEA with 13 countries -Gibraltar,
Bahamas, Bermuda, the British Virgin Islands, the Isle of Man, the Cayman
Islands, Jersey, Liberia, Monaco, Macau, Argentina, Guernsey and Bahrain -
where money is believed to have been stashed away. India and Switzerland, claims
a report, have agreed to allow India to routinely obtain banking information about
Indians in Switzerland from 1 April 2011.
In June 2014, the Finance Minister Arun Jaitely on behalf of the Indian
government requested the Swiss Government to hand over all the bank details and
names of Indians having unaccounted money in Swiss banks.
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Proposals to prevent Indian black money
History
Even in colonial India, numerous committees and efforts were initiated to identify
and stop underground economy and black money with the goal of increasing the
tax collection by the British Crown government. For example, in 1936 Ayers
Committee investigated black money from the Indian colony. It suggested major
amendments to protect and encourage the honest taxpayer and effectively deal with
fraudulent evasion.
Methodological Issues and Estimates
THE methodologies used by various economists may be grouped in several ways.
Acharya identifies five approaches:
(a) Fiscal Approaches;
(b) Monetary Approaches;
(c) Physical Input Approaches;
(d) Labour Market Approaches; and
(e) National Accounts Approaches.
He had provided the salient features of those methodologies and critically reviewed
four estimates of the size of the unaccounted economy of India(i) Chopra*; (ii)
Gupta and Gupta*, (iii) Gupta and Mehta*, and (d) Ghosh, et al.*, using four
methodologies, namely, (a), (b), (c), and (e), respectively. He had also examined
two other estimates(i) Kabra*; and (ii) Rangnekar*, which implicitly uses the
Fiscal Approach.
Gupta and Gupta* had reviewed the metho-dologies employed by researchers in
several developed countries in order to identify the most appropriate one suitable
for India. They had been grouped into six approaches:
(a) National Accounts Method;
(b) Performance Rate Measures (or Labour Market Approach);
(c) Tax Evaluation Mattod (or, Fiscal Approach);
17

(d) Survey Method;
(e) Nave Method; and
(f) Monetary Approach (Currency Demoni-tisation and Transaction Approach).
Apart from giving brief methodologies, Gupta and Gupta* had also presented the
recently available estimates based on such methodologies in repect of several
countries. They had concluded that the Transaction Approach developed by Fiege*
is at present the most comprehensive in terms of its coverage of unrecorded
activities not necessarily all illegal. Their own exercise, made in 1982 and based
on Fieges* method, had been critically reviewed by Sandesara and Acharya*.
Tanzi* in his paper on the annual estimates (1930-1980) of the unaccounted
economy in the US based on the variants of monetary appro-aches, had listed the
various methodologies as under;
(a) Direct Measurement (Fiscal Approach);
(b) Questionnaire Method (or, Survey Method);
(c) Employment Statistics Method (Parti-cipation Rate Measure of Labour Market
Approach);
(d) National Accounts Method as well as Income-Consumption analysis of the
House-hold Studies; and
(e) Monetary Approach (the Fixed Ration, Currency Denomination, and the
Currency Equation variants).
Estimates of the Indian Situation
SEVERAL Indian economists have also tried to put together the Indian
estimates to facilitate easy reference and comparison, for example, Acharya*,
Prasad*, Datt*. Acharya compared Wanchoo+, Chopra*, Gupta and Gupta*,
(1983), Gupta and Mehta*, Ghosh et. al*, and Rangnekar*. Prasad* had
compared his own (based on his own model) with those of Wanchoo
Rangnekar*, Anita, Kaldor*, Datt* had dealt with Kaldor*, Wanchoo+,
Rangnekar*, Chopra*, and Gupta and Gupta* (1982)
18

MOST of the non-methodological papers have generally focussed on the above
issues. It may be worthwhile to document the wide range of views, some based on
the analysis of the current situation and several facts expressed and suggestions
made. The factors contributing to the growth of the unaccounted economy that
recur in many articles predictably include (a) unrealistic and irrational structure
(including sales taxes, customs and excise duties); (b) proliferation of regulations
(controls); (c) prohi-bition relating to underground activities (drug trafficking,
illegal gambling); (d) political (and electoral) corruption; and (e) bureaucratic
corruption. Some authors have mentioned chan-ging social attitudes and erosion of
traditional values as the causes of the accumulation of black money.
As regards remedial measures and their evolution as a policy package, Datt* had
grouped the various suggestions under two categories:
(a) within the framework of the mixed economy, black money can be limited and
its size can be brought within manageable limits so that it does not pose a threat to
the very objectives of national economic policies; and
(b) the mixed economy is only a euphemism for the capitalist system and it is not
possible to control the black money within this frame-work.
Notwithstanding such divergent views, the remedial measures suggested are aimed
at counteracting the causes listed in the relevant literature and include (a)
rationalisation of the tax structure and regulatory measures; (b) demoniti-sation;
and (c) stringent penal measures to curb illegal activites. Since tax evasion is
considered as the major source of generating black money, issues like
rationalisation of the tax structure, efficient tax administration, and the recommen-
dations of the Wanchoo Committee+ report dominate the literature.
The readers will find Kabra* and Datt* useful in having a reasonable overview of
the various suggestions and opinions contained in the literature

Current Proposals
In its white paper on black money, India has made the following proposals to
tackle its underground economy and black money.
Read WhitePaper_BackMoney2012
http://finmin.nic.in/reports/WhitePaper_BackMoney2012.pdf
19


Reducing disincentives against voluntary compliance
Excessive tax rates increase black money and tax evasion. When tax rates approach
100 per cent, tax revenues approach zero, because higher is the incentive for tax
evasion and greater the propensity to generate black money. The report finds that
punitive taxes create an economic environment where economic agents are not left
with any incentive to produce.
Another cause of black money, the report finds is the high transaction costs
associated with compliance with the law. Opaque and complicated regulations are
other major disincentive that hinders compliance and pushes people towards
underground economy and creation of black money. Compliance burden includes
excessive need for compliance time, as well as excessive resources to comply.
Lower taxes and simpler compliance process reduces black money, suggests the
white paper
Banking transaction tax
Baba Ramdev also known as Yoga guru outlined his policy prescription that
involves replacement of most direct and indirect levies with a banking transaction
tax and de-monetisation of currency notes of Rs 500 and Rs 1,000 to help prevent
Indian black money, ease inflation, improve employment generation and also
lower corruption
Economic liberalisation
The report suggests that non-tariff barriers to economic activity such as permits
and licences, long delays in getting approvals from government agencies are an
incentive to proceed with underground economy and hide black money. When one
can not obtain a licence to undertake a legitimate activity, the transaction costs
approach infinity, and create insurmountable incentives for unreported and
unaccounted activities that will inevitably generate black money. The successive
waves of economic liberalisation in India since the 1990s have encouraged
compliance and taxes collected by the government of India have dramatically
increased over this period. The process of economic liberalisation must be
relentlessly continued to further remove underground economy and black money,
suggests the report.
Reforms in vulnerable sectors of the economy
Certain vulnerable sectors of Indian economy are more prone to underground
economy and black money than others. These sectors need systematic reforms. As
example, the report offers gold trading, which was one of the major sources of
20

black money generation and even crime prior to the reforms induced in that sector.
While gold inflows into India have remained high after reforms, gold smuggling is
no longer the menace as it used to be. Similar effective reforms of other vulnerable
sectors like real estate, the report suggests can yield a significant dividend in the
form of reducing generation of black money in the long term.
The real estate sector in India constitutes about 11 per cent of its GDP. Investment
in property is a common means of parking unaccounted money and a large number
of transactions in real estate are not reported or are under-reported. This is mainly
on account of very high levels of property transaction taxes, commonly in the form
of stamp duty. High transaction taxes in property are one of the biggest
impediments to the development of an efficient property market. Real estate
transactions also involve complicated compliance and high transactions costs in
terms of search, advertising, commissions, registration, and contingent costs
related to title disputes and litigation. People of India find it easier to deal with real
estate transactions and opaque paperwork by paying bribes and through cash
payments and under-declaration of value. Unless the real estate transaction process
and tax structure is simplified, the report suggests this source of black money will
be difficult to prevent. Old and complicated laws such as the Urban Land Ceiling
Regulation Act and Rent Control Act need to be repealed, property value limits
and high tax rates eliminated, while Property Title Certification system
dramatically simplified
Other sectors of Indian economy needing reform, as identified by the report,
include equity trading market, mining permits, bullion and non-profit
organisations.
Creating effective credible deterrence
Effective and credible deterrence is necessary in combination with reforms,
transparency, simple processes, elimination of bureaucracy and discretionary
regulations. Credible deterrence needs to be cost effective, claims the report. Such
deterrence to black money can be achieved by information technology (integration
of databases), integration of systems and compliance departments of the Indian
government, direct tax administration, adding data mining capabilities, and
improving prosecution processes.
Supportive measures
Along with deterrence, the report suggests public awareness initiatives must be
launched. Public support for reforms and compliance are necessary for long term
solution to black money. In addition, financial auditors of companies have to be
made more accountable for distortions and lapses. The report suggests
Whistleblower laws must be strengthened to encourage reporting and tax recovery.
21

Amnesty
Amnesty programmes have been proposed to encourage voluntary disclosure by
tax evaders. These voluntary schemes have been criticized on the grounds that they
provide a premium on dishonesty and are unfair to honest taxpayers, as well as for
their failure to achieve the objective of unearthing undisclosed money. The
report suggests that such amnesty programmes can not be an effective and lasting
solution, nor one that is routine.
International enforcement
India has Double Tax Avoidance Agreements with 82 nations, including all
popular tax haven countries. Of these, India has expanded agreements with 30
countries which requires mutual effort to collect taxes on behalf of each other, if a
citizen attempts to hide black money in the other country. The report suggests that
the Agreements be expanded to other countries as well to help with enforcement.
Modified Currency Notes
Government printing of such legal currency notes of highest denomination i.e.;
1000 (US$16) and 500 (US$8.10) which remain in the market for only 2 years.
After a 2-year period is expired there should be a one year grace period during
which these currency notes should be submitted and accepted only in bank
accounts. Following this grace period the currency notes will cease to be accepted
as legal tender or destroyed under the instructions of The Reserve Bank of India.
As a consequence turning most of the unaccountable money into accountable and
taxable money
Developments So Far
The Government of India had earlier appointed a number of Commissions and
Committees to look into the matter. Appendix II gives a list. It includes a report
prepared by a distinguished economist Nicholas Kaldor* who was invited by the
then Prime Minister, Jawaharlal Nehru, to make an assessment of the Indian
situation. Kaldor submitted the report in 1956. However, it is the Wanchoo
Committee Report (1971)+, which got wide publicity because of the persistent
criticism of the CPI-M MP, Jyotirmoy Bosu, in Parliament of the total failure of
the government to implement the recommendations of the earlier Commissions and
Committees

In August 2010, the government revised the Double Taxation Avoidance
Agreement to provide means for investigations of black money in Swiss banks.
This revision, expected to become active by January 2012, will allow the
22

government to make inquiries of Swiss banks in cases where they have specific
information about possible black money being stored in Switzerland.
In 2011, the Indian government received the names of 782 Indians who had
accounts with HSBC. As of December, 2011, the Finance Ministry has refused to
reveal the names, for privacy reasons, though they did confirm that no current
Members of Parliament are on the list. In response to demands from the Bharatiya
Janata Party (BJP) opposition party for the release of the information, the
government announced on 15 December that, while it would not publish the
names, it would publish a white paper about the HSBC information
According to White Paper on Black Money in India report, published in May 2012,
Swiss National Bank estimates that the total amount of deposits in all Swiss banks,
at the end of 2010, by citizens of India were CHF 1.95 billion (INR 92.95 billion,
US$2.1 billion). The Swiss Ministry of External Affairs has confirmed these
figures upon request for information by the Indian Ministry of External Affairs.
This amount is about 700 fold less than the alleged $1.4 trillion in some media
reports.

In February 2012, the director of the Central Bureau of Investigation said that
Indians have $500 billion of illegal funds in foreign tax havens, more than any
other country. In March 2012, the Government of India clarified in its parliament
that the CBI Director's statement on $500 billion of illegal money was an estimate
based on a statement made to India's Supreme Court in July 2011.

In February 2012, Central Bureau of Investigation (CBI) director A P Singh
speaking at the inauguration of first Interpol global programme on anti-corruption
and asset recovery said: "It is estimated that around 500 billion dollars of illegal
money belonging to Indians is deposited in tax havens abroad. Largest depositors
in Swiss Banks are also reported to be Indians". In a hint at scams involving
ministers, Singh said: "I am prompted to recall a famous verse from ancient Indian
scriptures, which says . In other words, if the King is immoral
so would be his subjects" The CBI Director later clarified in India's parliament that
the $500 billion of illegal money was an estimate based on a statement made to
India's Supreme Court in July 2011.
After formal inquiries and tallying data provided by banking officials outside
India, the Government of India claimed in May 2012 that the deposits of Indians in
Swiss banks constitute only 0.13 per cent of the total bank deposits of citizens of
23

all countries. Further, the share of Indians in the total bank deposits of citizens of
all countries in Swiss banks has reduced from 0.29 per cent in 2006 to 0.13 per
cent in 2010.
The through the Investigation Division of the Central Board of Direct
Taxes released a White Paper on Black Money giving the Income Tax Department
increased powers.
Recent developments:
The Centre has submitted a list of 627 Indians who have accounts in HSBC bank,
Geneva, to the Supreme Court on Wednesday, directing a special investigation
team (SIT) to complete the tax probe on suspected black money by March next
year.
Prime Minister Narendra Modi says he wants to prosecute tax dodgers and bring
money stashed in tax havens back into the country but his opponents claim enough
progress has not been made since his landslide election victory earlier this year.
Here's the ten developments since the National Democratic Alliance (NDA)
government took charge at the Centre in May this year:
1. May 27: Modi govt forms SIT
Signalling his governments resolve to bring back the countrys black money
stashed abroad, PM Modis first decision in the maiden meeting of his cabinet was
to form a high-profile SIT to unearth illicit money.
The SIT is headed by former SC judge MB Shah and includes the highest-level
officials from financial and economic departments as well as law enforcement
agencies.
The decision came just a day before the apex courts deadline to form the SIT was
set to expire.

2. Oct 17: 'Black money info cannot be disclosed to all'
The Centre on October 17 told the SC that it could not disclose the names of those
who have deposited money in banks abroad as it this would jeopardise tax
agreements with nations providing those names to India.
24

This echoes the line taken by the previous United Progressive Alliance
government, which the BJP had slammed over alleged inaction on the issue and
made it into an election issue earlier this year.
Appearing before a bench headed by Chief Justice HL Dattu, Attorney general
Mukul Rohatgi said that all amounts deposited in foreign banks by Indian citizens
cannot be termed black money and that it is not a crime to open such accounts.
However, finance minister Arun Jaitley rejected any notion that the BJP was
reluctant to make the names public.

3. Oct 17: FM says Switzerland agrees to provide details of black money
Jaitley said that Switzerland had agreed to share information on Indians bank
accounts on independent evidence provided in each case, marking a major step in
efforts to secure data from the Alpine nation, known for its banking secrecy laws.
Jaitley said Switzerland had agreed to share information related to HSBC and
Liechestein lists of account holders, provided there is independent evidence
collected by Indian authorities.
As per Swiss National Bank's latest data, the total money held by Indians in Swiss
banks stood at over Rs. 14,000 crore as on December 2013, up by nearly 42% from
a year ago.

4. Oct 27: Govt discloses eight names to SC
Days after it was criticised for backtracking on its election promise to bring back
black money stashed abroad, the Modi government named seven persons and a
company facing prosecution for keeping illegal wealth in foreign banks.
The much-awaited list did not include names of any politician. Those named in a
government affidavit were Pradip Burman of the Dabur group, Rajkot-based
bullion trader Pankaj Chimanlal Lodhya and directors of Goa-based mining
company Timblo Private Limited Radha Satish Timblo, Chetan S Timblo,
Rohan S Timblo, Anna C Timblo and Mallika R Timblo. Timblo Private Limited,
a firm identified by Association for Democratic Reforms as a donor to both the
BJP and the Congress, was also named.
25


5. Oct 27: Oppn slams BJP for calling affidavit historic
Political reactions were sharp after the government revealed the names of seven
persons and a company facing prosecution for keeping illegal wealth in foreign
banks.
Sambit Patra, a BJP spokesperson, called disclosure of the names "a historic day in
the black money case".
But Congress general secretary Digvijaya Singh accused the BJP of "selective
revelation" of names and said the process smacked of "blackmail, not black
money".
AAP leader Arvind Kejriwal said the revelations of black money account holders
should not be selective. "There should not be selective revelation of names. The
big fish are being let off," he told the media.
Congress spokesperson Abhishek Manu Singhvi cited four tweets by Modi before
the Lok Sabha elections in which he had slammed the previous Manmohan Singh
government for its lack of commitment to bring back black money from foreign
banks.

6. Oct 28: SC pulls up Centre
The apex court directed the government to submit to it the names of all foreign
bank account holders by Oct 29, saying it need not provide a protective
umbrella to such persons.
The court also turned down the governments request that it modify its order
seeking the names of all such account holders. The Centre had contended that the
names should be revealed only after investigations proved the accounts indeed held
black money and led to prosecution against tax evaders.

7. Oct 29: Centre gives black money full list to SC
The government submitted a list of 627 Indians holding accounts in HSBC
Bank, Geneva, to the court, which directed its SIT to examine them and take
appropriate action.
26

After handing over a sealed envelope, attorney general Mukul Rohatgi said it
contained three documents the governments correspondence with the French
government, the list of names and a status report.

8. Oct 29: No revelation, for now
A special bench of the apex court headed Dattu refused to open the envelope
handing over by the Centre, saying it would be done by the SIT chairman and vice-
chairman.
We dont want to open these papers and embarrass anyone. That has never been
our intention, it said.
Scheduling the next hearing for December 3, it asked the SIT to submit a status
report by November 30 after ascertaining who had black money accounts abroad.

9. Oct 29: State of confusion
On Tuesday, the top court directed the government to submit the full list after the
latter said it wasnt possible to make the names of all foreign bank account holders
public. Rejecting the Centres submission, the CJI said, If it breaches
confidentiality, let it be so.
But on Wednesday, the court refused to open the sealed envelope which
contained the list of foreign account holders.
It was also not clear why the court insisted on getting the list from the government
when the latter had submitted it to the court-appointed SIT in June.
The Centre, meanwhile, was allowed by the court to raise its objections against
making all the names public before the SIT.

10. Oct 30: What's next
The SC-appointed SIT, looking into the black money cases, on Thursday said it
will go after the offenders "big or small" but made it clear that confidentiality
about account holders abroad will not be violated.
27

It also said it was gathering more names other than the over 600 account holders in
HSBC bank, Geneva, given by the government to the apex court on Wednesday,
for investigation.
"Before us, nobody is big, nobody is small. Everybody is equal. Whoever has
looted this country will be caught and will be punished, economically and
otherwise also. That we assure. Both of us (SIT chief Justice Shah) are too well
known for doing it to discomfort of many people," vice chairman Justice Arijit
Pasayat said.
The SIT was asked to complete the probe by next March.
India`s Black Money in Swiss Bank
http://myeconomist.wordpress.com/indias-black-money-in-swiss-bank/

This is not so surprising .India is the world`s most corrupt country.Corruption is
not new in India.Recently due to international pressure, Swiss government agreed
to disclose the names of the account holders only if the respective government
formally asked for it.
Black money in Swiss banks Swiss Banking Association report, 2006 details
bank deposits in the territory of Switzerland by nationals of following
countries:
Top five
India- $1,456 billion
Russia $ 470 billion
UK -$390 billion
Ukraine $100 billion
China $ 96 billion
India has more money in Swiss bank than all the other countries combined.Second
best Russia has 4 times lesser deposit. US is not even there in the counting in top
five.
609 people in India having legal property more than Rs- 100 crores (Rs- 10
Million). Indian President one day living cost is Rs-8 crore, living in a place
where 350 flats.One day Indian Parliament running cost is around 9 crore
Rupees.Britishers looted 350 Lakh Crore in 250 years whereas Indian himself
28

looted 330 crore. 70 Lakh crore only deposited in swiss bank. 84000 corrupt
people in India.India has around 450 Billion dollar of coal deposit & 170
billion of iron ore deposit,looted by state politicians .According to Indian
Government around 1 Lakh place in India where people doing illegal mining.
Dishonest persons, scandalous politicians and corrupt IAS, IPS officers have
deposited in foreign banks in their illegal personal accounts a sum of about $ 1500
billion, which have been misappropriated by them. From 2003 to 2010 out of 5,635
IPS officers fifty(50) IPS officers were resigned and joined private company.
This amount is about 13 times larger than the countrys foreign debt. With this
amount 45 crore poor people can get Rs 1,00,000 each. This huge amount has been
appropriated from the people of India by exploiting and betraying them.
Some 80,000 people travel to Switzerland every year, of whom 25,000 travel
very frequently.Obviously, these people wont be tourists.

Why our Indian Government is not asking to swiss Bank? Well the answer is
simple , our Government is working under the influence of those politicians &
industrialists who have huge deposit in Swiss bank.They cann`t expose their
own people.
USA have settled their Swiss bank Account & their top Billionares in their
countries paid to their country 50% of their Money which includes Gates &
Bloomberg.Italy got 6.4 Billion dollar from swiss Bank,Germany got 5.7
Billion dollar from swiss Bank & France got 1.7 Billion dollar from swiss
Bank.
Schweitzer I llustrierte, a Swiss news magazine,published on 19th November 1991,
has alleged in an old issue that the Soviet intelligence agency KGB had deposited
US $2.2 billion in a Swiss bank account in 1985 in the minor account of Rahul
Gandhi managed by his mother Sonia Gandhi . Janata Party President Dr
Subramanian Swamy, who had secured an order from the Delhi High Court to the
CBI to investigate alleged receipt of slush money by late former Prime Minister
Rajiv Gandhis family, has cited a November 1991 issue of the Swiss magazine in
support of his charge.He has further claimed that the payments were authorized by
CPSU by a resolution CPSU/CC/No 11228/3 dated 20/12/1985 and the same was
also endorsed by the USSR Council of Ministers in Directive No 2633/Rs dated
20/12/1985. He also claimed that these payments had been coming since 1971 as
the payments received by Sonia Gandhis family have been audited in CPSU/CC
29

resolution No 11187/22 OP dated 10/12/1984. Reference:
http://swissprivacy.tripod.com/id8.html
Why Government is not taking action on corrupt peoples ? Why CBI is not
independently working? well answer is simple ,Government is taking lots of
money in the name of party fund and also taking help from those politicians who
are involved in
criminal charges.Whole police in India is working under politicians. According to
RBI (Reserve Bank Of I ndia) Rupees 17,18,826 crore notes print in I ndia
between year 2000-2010. Rupees 10 Lakh Crore money incirculation in I ndia.
Generally 2-3 % of GDP money circulation in other countries. But I ndian
Government has allowed four Swiss bank & Eight Bank of Italy in India.
Sources says that NGO is also engaged in converting black money into white
Money.
swiss bank(ubs) revealed 6000 USA people names . In may 2008 Germany
bank revealed 28 people names but government is still hiding their names.
Even the Supreme court of India asked for names three times. But
Government only make deal with 23 countries of Double Taxation.
USA got his money, France , Italy , countries like
Singapore fought and get their money.India has more than 3.5 crore
taxpayers. Black Money can be used by terrorists. Probably they are trying to
move money to other countries or will invest in real-estate like in dubai or
arab countries.After huge pressure from media & civil society Government
has joined FATA (Financial Action Task Force) group only to delay issue.
http://indiatoday.intoday.in/site/Story/126998/LATEST%20HEADLINES/ind
ian-link-to-swiss-money-trail-revealed.html
In the data shared by Ex-Swiss banker Rudolf Elmer, there are at least three
companies that go by the name of Annapurna. These accounts have been opened
in the New York branch of the Swiss Bank Julius Baer.These accounts are
Annapurna Convertible Ltd, account number 420331. Annapurna Leverage Ltd,
account number 427039 .Annapurna Convertible USD, account number
431916.Money running into crores of rupees has been stashed away in these
accounts.57 million dollars or Rs 259 crore have been stashed away in Annapurna
Convertible ltd. 18.6 million dollars or Rs 84 crore are lying in Annapurna
Leverage Limited.And 10.3 million dollars or Rs 45 crore are hidden away in the
account of Annapurna Convertible.Interestingly, the documents list the same
company and same person as managing all the Annapurna accounts.Annapurna
30

Convertible, Annapurna Leverage and Annapurna Convertible USD are all
managed by Pius Fisch of Fisch Asset Management.The other name to come out
was that of Asad Ali Khan and his wife Zahida, who was a co-account holder.
Headlines Today scoured through the records sent to us by Rudolf Elmer and
found out how Asad Ali Khan had siphoned off a huge amount of money to the
Julius Baer Bank in Cayman Islands.A company in the name of Unicorp Services
was incorporated in Cayman Islands.Its registered address is Post Box 1100, Kirk
House, Grand Cayman Island, BWI.According to Elmers documents, the
registration number of the company is 00233755.In the year 1999, Asad Ali Khan
and Zahida were present for the dissolution of this company as directors of
Unicorp Services in Cayman Islands.Elmers data also shows that the account was
being managed by J.M.I. Gillani.The official address is: Banque Julius Baer, 2
Boulevard du Theatre, Case Postale, CH 1211, Geneva 11, Switzerland.
Where Black money is being used? Election, Air travel , Tour, Restaurants,
Land, Jewelery.
Who is involved in Black Money? Senior bureaucrats (IAS,IPS officers),
Ministers of Export-Import,Comerce, Chief Ministers, Top Industrialists , Horse
Trader, Liquor Trader.
4000 kg gold sold in year 2010 in India.
144 nations signed UNCAC (United Nation Convention Against Corruption) but
India is not signing because Indian Government is engaged in corruption. UNCAC
Opened for signature from 9 December 2003 by the UN General Assembly & last
date was 14 December 2005.
Highly placed sources in New Delhi and Mumbai say much of the money held in
Swiss banks, and other tax havens like the Bahamas, have been routed into the
Indian stock exchanges through Participatory Note (PN) bought in Mauritius
through front companies. Since these instruments are not registered to trade in
Indian domestic capital markets, the investors names remain undisclosed. The
route to take out the money is hawala and to bring it back is Participatory Note ,
says Hemen Kapadia, one of Mumbais top stock market analysts. Roughly 50-60
percent of FII investments, aggregating $85 billion till late 2009, were made
through the Participatory Note route. And according to Kapadia, this route saw 75
percent traffic in the last few months. A worried market regulator, the Securities
and Exchange Board of India (SEBI) is now learnt to have asked several FIIs to
furnish details of the Participatory Note issued to their clients, but it has been
consistently stonewalled. They will always win by citing client confidentiality
31

agreements, and I doubt whether SEBI has the necessary legal teeth to probe
further, Kapadia points out.
India`s economic debthttp://www.indiabudget.nic.in/es2009-
10/chapt2010/tab84.pdf
FII investment in Indian stocks this year touched a record $18.13 billion (
Rs.82,360 crore), according to the SEBI website. In dollar terms the previous
high was in 2007 ($17.65 billion) and in rupee terms in 2009. Stock market
analysts say FII investment in rupee terms is lower because of appreciation in the
Indian currency against the dollar. The Sensex last year gained over 80 percent
a figure it is likely to surpass this year.
Not taking into account the recently concluded Coal India IPO, the FII bids
amounted to Rs. 1.20 lakh crore. Some foreign entities that have placed large
bids for Coal India through PNs include Citibank ($1 billion), Merrill Lynch ($2
billion) and Deutsche Bank ($3 billion). The Qualified Institutional Buyer (QIB)
quota in the Coal India IPO that was oversubscribed 24 times was primarily due to
intense FII interest.
In fact, in 2007, when the then National Security Adviser MK Narayanan had
spoken of terror funds routinely penetrating and manipulating the markets,
he was hinting at PNs. Earlier, the RBI too had come out with a report
expressing concern over the illegal traffic. At that time 89 percent of the funds
invested by FIIs had come through the PN route, RBI data showed.According
to recent estimates, roughly $200 billion four times the external debt of
Pakistan is stashed away in Swiss banks and is now being withdrawn.
A major area of vulnerability for us is the high consolidated public-debt to GDP
ratio of over 70 percent (and) consolidated fiscal deficit, says the Governor of
Reserve Bank of India (RBI), Mr. Yaga Venugopal Reddy.
According to CIA world fact book, the Current account balance of India is
MINUS -37,510,000,000 (minus) while China is the wealthiest country in the
world with $ 426,100,000,000 (Plus) . India listed as 182 and China as no.1 .
Money inflow in India is currently Rs 7,000 crore.
Total number of registered corruption cases was 64,00,000 in 1989 , now in year
2010 is 1,64,00,000 .
Hasan Ali 6 Billion Dollar swiss Bank account-
32

http://timesofindia.indiatimes.com/india/Hasan-Alis-6bn-in-Swiss-accounts-
missing/articleshow/7365076.cms
Surely it`s time to Ban 1000 rupee note-
http://www.governancenow.com/news/regular-story/check-corruption-ban-rs-
1000-note
Sources say that NGO is the main source of Black Money in India.
http://www.hindustantimes.com/833-NGOs-blacklisted-for-misappropriation-of-
funds/H1-Article1-488589.aspx
The GFI report says, From 1948 through 2008, India lost a total of $213
billion in illicit financial flows (or illegal capital flight). These illicit financial
flows were generally the product of corruption, bribery and kickbacks, and
criminal activities. The total of $213 billion is a misleading figure because the
present value of Indias illicit financial flows is at least $462 billion, the GFI
report explains, adding, This is based on the short-term US Treasury bill rate as a
proxy for the rate of return on assets. The GFI (Global Financial Integrity)
report points out that the total capital flight represents approximately 16.6
percent of Indias GDP as of year-end 2008; that illicit financial flows out of
India grew at 11.5 per cent per year; and, that India lost $16 billion per
year between 2002-2006.The present value of illicit assets held abroad ($462
billion) accounts for approximately 72 per cent of Indias underground
economy which has been estimated to account for 50 per cent of Indias
GDP ($640 billion at the end of 2008). Just above a quarter of illicit assets are
held domestically.The fact that deposits in tax havens have increased from 36.4 per
cent of illicit financial flows in 1995 to 54.2 per cent in 2009 tells its own story.
Well if Swiss Bank cann`t give information to India then why Indian
Government is not stopping money that they are coming from outside India.
But how can a corrupt system do?
We need to start a movement to pressurize the government to do so !! this is
perhaps the only way, and a golden opportunity, to expose the high and mighty and
weed out corruption !!
Is India poor, who says? Ask Swiss banks With personal account deposit bank of
$1500 billion in foreign reserve which have been misappropriated, an amount 13
times larger than the countrys foreign debt, one needs to rethink if India is a poor
country?
33

For Black Money, Look in India, Not Switzerland
The BJP govt. has made a big issue of bringing back black money stashed by
Indians abroad. But a comprehensive study on India's parallel economy, running
into over 1000 pages and conducted by the finance ministry's think tank, National
Institute of Public Finance and Policy (NIPFP), has made sensational revelations
about black money generated by domestic economic activity.

The study, presented to the Finance Minister and the newly-set up SIT on black
money, says the extent of unaccounted money generated in today's globalised
Indian economy could go upto 71% of India's GDP.

India's GDP is roughly $2 trillion. This means the parallel economy could be of
the order of $1.4 trillion. This is particularly significant because most studies done
on India's black economy in the past, especially the pre-liberalization era, put the
value of the parallel economy at less than 30% of GDP.

The current study by NIPFP reckons the parallel economy may have multiplied in
the past 25 years. This period also saw India's deeper integration with the world
economy which itself may have further boosted the growth of India's parallel
economy.

The report provides an illustration of how political parties are a big conduit for
carrying black money. In one significant table it shows what percentage of the
donations received by political parties are constituted by contributions of less than
Rs.20,000. Almost all parties claim to receive over 80% of their funds in
denomination of less than Rs.20,000. In effect, political parties are claiming they
receives less than 20% of their total donations from big corporates who pay large
amounts! This is plainly absurd.

Overall the political significance of the NIPFP report is that the BJP government
may be forced to look inward to deal with the menace of black money rather than
focus all its attention on Swiss bank accounts held by Indians.

In any case, there is serious doubt whether $400 to $500 billion belonging to
34

Indians would be sitting in Swiss accounts. Officially, the Swiss authorities have
reportedly claimed Indians have less than $3 billion in banks based in Switzerland.
The empirical origin of the $500 billion figure is yet unknown. This figure got
popularized when a CBI Director casually mentioned it to the Supreme Court
where a Public Interest Litigation was filed in regard to getting Indian money back
from Swiss accounts. In any case, the Swiss authorities are cooperating now and it
will soon be known how much money Indians have illegally stashed abroad.

Also, it must be understood that normally illicit monies don't sit idle and they get
invested in global assets where returns are high. It is quite possible that individuals
and businesses that have black money abroad may have partly invested them back
in India or some other place abroad.

The report says that between 2000 and 2009, India had seen the illicit outflow of
funds to the tune of over $100 billion due to trade misinvoicing in export and
import. It is not surprising that this period also coincided with a massive boom in
India's international trade with exports and imports running at over 25% on
average. In some years, exports saw 30% plus growth. Many economists and trade
experts have wondered from time to time whether a part of the export growth
recorded during the boom years was indeed real!

The NIPFP report, which is yet to be made public, goes into several sectors of the
economy and looks at the unaccounted economic activity. For instance it reckons
that the mining sector could have about 11% unaccounted-for output. This could be
due to illegal mining that was so common in states like Karnataka, Goa, Jharkhand
etc.

It says gold is probably one of the biggest sources of laundering black money in
the economy. Gold is most commonly used for hawala purposes, the report says.
There is no real estimate of gold held by people in India. The report suggests there
is a need to take formal measures to quantify gold held by individuals on a periodic
basis. There are huge data problems in studying the gold market.

The diamond trade is also a big source of laundering money. India imports rough
diamonds on a large scale and exports polished diamond. "Sometimes the price of
35

import of polished diamond exceeds that of export suggesting overinvoicing of
export or under-invoicing of import," the report claims. This helps in laundering
cash.

Another big source of generation of black money is the real estate sector
which has witnessed an unprecedented boom in the past ten years or so. The
report suggests that in Delhi, the ratio of unaccounted value of real estate
transactions to the total value is as high as 78%. The same ratio is 50% in
Kolkata and Bangalore.

In smaller towns and semi-urban centres, nearly 100% of property
transactions are conducted in cash. The report implies that the real estate
market is probably as non-transparent as the gold market. The stock markets,
especially what traders describe as "Dabba market" or grey market, also
remains one of the key sources of creating and laundering black money. The
report says the present regulatory framework is totally inadequate in dealing
with such grey markets.

The study also examines how big social sector programmes of the government also
generate black money when the funds are appropriated by those not intended to
benefit. It takes MNREGA as an example where some states saw funds leakage to
the tune of over 30% to 40% and this money becomes unaccounted as it is used to
buy real estate or some other assets by the unintended beneficiary.

The significance of the NIPFP report is that the new government as well as the SIT
on black money will probably end up focusing a lot more on the domestic sources
of black money which could also have links with foreign accounts as money moves
seamlessly across borders in the age of globalisation.
India Cannot Deal With Black Money Unilaterally
The issue of black money is one of the focal points of the current debate about
corruption in India but neither the discussion nor the proposals to deal with it show
any understanding of the phenomenon. This is not surprising, for corporate mass
media have done little to illuminate the issue. A brief history lesson is necessary to
show its real nature and magnitude.
36

The term itself is historically recent. It came into popular usage only after the
emergence of the global black market in the 1960s, itself the result of European
colonial Powers adjusting to the loss of their empires. Britain led the way, for it
had several decades of relevant experience: after the first Opium Convention of
1902 (which the United States pressed on European Powers reluctant to give up the
enormously lucrative trade into China), the British simply took the whole business
underground. Its corporations became drug runners and its banks became adept at
laundering the huge revenues of the trade.
When decolonization transformed Africa, Asia and the Caribbean in the decades
after World War II, the European colonial Powers, again led by the British, did two
things. One was to ensure remote control of the territories they gave up, either by
transferring power to a co-opted native group or by arranging fratricidal conflicts
that allowed them to manipulate the newly independent countries. Secondly,
they put in place a new institutional support structure for a new system of
transnational crime to replace colonialism.
It consisted of over a million shell companies (corporations with unidentifiable
owners and assets), and nearly 80 tax havens or offshore financial centres.
Most of this globally distributed system consisted of bits and pieces of former
European empires. There were two primary hubs to the system, perennially neutral
and passive Switzerland with its long tradition of sheltering criminals and their
assets, and The City (financial centre) of London, continuing its actively predatory
policies.
The system now receives and manages a mindboggling amount of hot money.
Washington-based Global Financial Integrity (GFI) reported in 2009 that
developing countries were losing between $858 and $1.06 trillion annually. In
2005 London-based Tax Justice Network (TJN) estimated that the worlds High
Net-Worth Individuals held some $11.5 trillion in offshore tax havens. In 2010 the
International Monetary Fund estimated that just the small financial centres (i.e.
excluding Switzerland and London), held some $18 trillion in secret assets. The
overall size of the underground economy is anyones guess. The United Nations
estimated money laundering in 2010 at two to five per cent of global GDP: $800
billion to $2 trillion. The base from which the laundering takes place must
necessarily be much more.
These criminal flows have become indistinguishable from the aboveground
economy which processes electronically over $1.9 trillion per day, or nearly as
much as the total annual amount of U.S. exports and imports. Much of the illicit
37

flow is from tax havens into the aboveground economy; the available estimates do
not include assets moved in the form of cash and other untraceable items, but even
incomplete, they are impressive. The United Nations Conference on Trade and
Development reported in its 2010 World Investment Report that the flow of
Foreign Direct Investment (FDI) from Hong Kong in 2009 was more ($52.2
billion) than those of mainland China ($48 billion). Tiny British Virgin Islands had
more FDI ($26 billion) than all of oil-rich West Asia ($23 billion) or the Tiger
economies of South-East Asia ($21 billion). Indias FDI in 2009 was $14.8 billion.
In terms of FDI stock (cumulative total), Hong Kong has $834 billion and the
British Virgin Islands $224.8 billion, adding up to more than half the FDI stock of
the United States and dwarfing Chinas $229 billion and Indias $77 billion. States
have been very half-hearted in coming to grips with money laundering; there is no
mandatory international framework of rules and regulations, and no initiative to
ban shell companies or tax havens. The main vehicle for preventive action is a
Financial Action Task Force (FATF) which has issued 40 non-binding guidelines.
Against this background, it is obvious that unilateral action by India cannot hope to
bring black money home. The problem is not internal to India; it is global.
However, public discussion of the issue should help focus attention on the fact that
we cannot continue to sleepwalk into development as currently envisaged. The
problem is not only that corporate globalization cannot ensure prosperity for all
without destroying the planetary environment. It is also a vast engine of corruption
deeply inimical to democracy.
If we are to continue the Indian renaissance that began four centuries ago with
Kabir and Guru Nanak and found its slow but sure-footed way to Gandhi, we will
have to find an alternative means of generating wealth consonant with our
traditions and under democratic control.
Volte Face by successive Governemtns on Black Money
It is becoming clearer by the day that the Congress and BJP are the obverse and
reverse of the same neo-liberal coin. Finance Minister Arun Jaitleys latest
statement that the identity of those Indians who have stashed away billions of
dollars of black money in foreign banks, defrauding the people and the public
exchequer, cannot be brought back because of legal difficulties only confirms it. It
needs to be remembered that black money was one of the key issues on which
Modi, Jaitley and other BJP leaders fought the Lok Sabha elections and sought to
put the Congress-led UPA Government on the dock.
38

Now the same Jaitley has taken shelter behind the same arguments that his
predecessors Pranab Mukherjee and P. Chidambaram used to trot out as Finance
Ministers. Jaitley now says that under the Double Taxation Avoidance Agreement,
confidentiality (as to the identity of the black money holders) has to be maintained
and the names revealed by the German authorities could be made public and be
used only for tax purposes. The names, Jaitley says, would be revealed once
charge-sheets are filed which means a lengthy legal process.
The simple question is that as the BJPs top legal luminary and as a veteran
Member of Parliament, was he unaware of this conditionality? Did he stumble
upon this fact only after becoming the Finance Minister? Let us recall what Modi
had told the people during the poll campaign. On February 12 this year, on a chai
pe charcha discussion, Modi said, according to a newspaper report,
He was committed to bring back black money stashed abroad and assured people
that if the BJP was to voted to power, he would set up a task force, amend laws and
distribute the money brought in as gift among honest tax-payers.
The whole country is worried about black money. It is an anti-national activity . . .
For bringing back this black money, you require a political will. I give an
assurance to my countrymen that when we will form a government in Delhi, we
will create a task force and if necessary will amend the laws.
We will bring back each and every penny deposited abroad by Indian citizens. I
am committed to this because this money belongs to the poor people of India and
no one has the right to do this kind of anti-national activity.
This is a straightforward statement without any ifs and buts about it. There is no
mention that his (would-be) government would be circumscribed by any
confidentiality clause.
Now about Arun Jaitley. As recently as on July 25, after taking the office of the
Finance Minister, Jaitley said on the floor of the Lok Sabha: Prime Minister
Narendra Modis government was moving fast on bringing back the ill-gotten
money stashed away by Indians in tax havens abroad. He went on to say: I can
assure you that you dont have to wait for long to see that we have brought back
the black money. Our government has formed a Special Investigating Team (SIT).
If the SIT wants to take steps, the government will give full cooperation. Whatever
information we are getting, we are giving that to Supreme Court as well. That was
in July. Now three months later in October he has discovered that the information
cannot be revealed due to the conditionality clause and used only for taxation
39

purposes and that, too, only after charge-sheets are filed at some future point of
time.
On his part, Modi also held out a carrot to the salaried classes, telling them that
whenever such money is brought in, five to 10 per cent of it will be given as a
gift to them because they earned fixed incomes and paid taxes honestly. That was
in February, in the thick of the election campaign when he needed votes from all
sections of the people.
It is only now that the people are realising that during the poll campaign they had
been taken for a ride by Modi and his likes. The promises that were made to them
about black money were hypocritical and insincere. These were meant only to win
the elections. The black money holders names cannot be disclosed for the simple
reason that these were the peopleindustrialists, businessmen, corporate bosses
who had spent thousands of crores of rupees through the print and electronic media
controlled by them to mount a high-voltage propaganda blitzkrieg to carry the
message to the people: ab ki bar Modi sarkar. Forfeiting the support of these
honourable benefactors would be disastrous for Modi and his party not only in
future elections but also during his five-year-long tenure in power which has just
begun.
But what about the amount of black money deposited by the dishonest
businessmen and corporate bosses in foreign banks by defrauding the people and
the public exchequer? No official figures are available. But in June this year the
ASSOCHAM came out with an estimate which put the amount of black money
abroad at $ 1.9 trillion or Rs 120 lakh crores. A mind-boggling figure indeed!
Assuming, for the sake of argument, that the names of the patriotic Indians who
have acquired and sent out so much of ill-gotten black money abroad cannot be
revealed, nor the money brought back, the next question is: has the Modi
Government taken any steps to prevent the ongoing generation of black money in
the economy and reduce its greatly negative impact on the governments revenue
earning and conse-quently on development? Let us hear what economists have to
say about it.
The burgeoning black economy, especially tax evasion, by reducing the buoyancy
of the governments tax and non-tax revenue . . . leads to a situation where the
governments revenue is less than that it could have been otherwise.
...
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A burgeoning black economy leads to widening of deficits through its effect on
revenue buoyancy.
...
The black economy affects not just the quantity of government expenditures but
also its quality. Corruption reduces the effectiveness of these expenditures. First,
the siphoning off of funds ensures that less amount of money is spent than what
was originally budgeted. Second, use of sub-standard material to meet the target
despite the reduced budget (thanks to corruption) brings down the quality of the
assets created.
Another eminent economist urges that it is imperative to face squarely the black
phenomenon in all its aspects by a series of well thought out and effective
interventions. (Does the Modi Government have any intention of making such
interventions?) He then goes on to say that the neo-liberal policies have given a
boost to the black sphere of activities, imposing a huge cost on the nation. How
huge is the cost?
A simple comparison of a widely quoted recent estimates of the ill-gotten black
money secretly taken out from India to various tax havens with an old time
estimate (for the year 1964) . . . should suffice to show that the menace has grown
to astronomical proportions and penetrated almost every sphere of our socio-
economic life. According to the estimate of the Global Financial Integrity Institute,
since independence the flight of black money or illegal income to various tax
havens amounted to something like US $ 462 billion while the estimate by Anne
Krueger for the rent generated in India was placed at Rs 201 billion, that is, about
7.1 per cent of the 1964 national income. It is not only important to bring back the
ill-earned money smuggled out to the foreign tax havens, but it is equally
important to stop the constant generation of black money within the system. But
this is just not possible in a neo-liberal regime to which Narendra Modi is as much
committed as his predecessor Manmohan Singh was.
Concluding Remarks
Black Money Criminals Who will Catch the Big Fishes?

As described in the previous sections, most of the studies had been related to
methodologies for assessing the size of the black money expressed both in terms of
41

the actual amount and also as per cent of the official GNP. As of now, the data are
available for nine fiscal years1969-70 to 1978-79. Further studies will certainly
show manifold increase of the amount. But so far, no steps have been taken to
implement the recommendations of the economists and the Commissions and
Committees irrespective of the political parties in power. Even the mandate of the
newly appointed multi-disciplinary committee is to go into the size of the black
money and a new amnesty scheme. The other name of the amnesty scheme is
voluntary disclousure. Does a thief voluntarily admit that he has stolen money?
Similar schemes floated earlier did not yield much. Voluntary disclosure schemes
are ways to reward culprits. In contrast, the honest taxpayers, primarily the salaried
persons, are harassed. How long will the government try to hide itself behind the
fig-leaf of international treaties? What prevents it from going ahead without
signing such treaties? The main culprits are the corrupt officials of three high-
profile government departments, namely, the Board of Direct Taxes (Income Tax),
Board of Indirect Taxes (Customs and Excise Duties), and Export-Import
authorities (Under-invoicing and Over-Invoicing). The crackdown should begin
with these organisations. Who will catch the big fishes? All political parties are not
at all interested in such action because of the prevailing corrupt electoral
compulsions. The FM must ponder over the matter.