RUHI SARANGAL 5717

BLACK MONEY
Income, as from illegal activities, that is not

reported to the government for tax purposes.

generated by any number of criminal acts,

including drug dealing, corruption, accounting and other types of fraud, and tax evasion.

It is also a cause of big loss in the taxrevenues for the government. black economy, unaccounted economy, illegal economy, subterranean

involved is as much as about Rs4O, OOO crores. constitutes around 20 per cent of the gross domestic product of the economy money involved in black/secret transactions or used in parallel economy.

Impact of Black Money

It leads to the misdirection of precious national resources. It has enormously worsened the income-distribution.

big handicap in making a correct analysis and formulation of right policies for it.

 Black money has corrupted our political system in a most vicious manner. money results in transfer of funds from India to foreign countries through clandestine channels.

 It is, therefore, no exaggeration to say that black

money is like a cancerous growth in the countrys economy which, if not checked in time,

is sure to lead to its ruination.

Effects of black money on Indian Economy

Affects public

revenues,
Degenerates the investable surplus, Delimits the national productivity, Drains the balance of payments, Distorts equity and equality concepts

What are Tax Havens

Small countries like Switzerland, Angola, Bermuda, etc that act as places of registration for overseas nonresident companies. They have zero or very low income tax. They ask no questions on the origins of the money coming into their banks.

 They keep all banking records secret and cooperate very little with other countries.

They have no contribution to the world, except as points on the worldmap where dirty money is kept safely.
Avg. size of 34 such point-countries = 17 kms by 17 kms.

Role of Switzerland
Swiss ambassador, Switzerland was accused of giving shelter to black money and there has been a lot of inflow of such wealth from India. [NDTV Profit 15-03-2008]

Switzerland has 1/3rd global private funds.

Switzerland must follow Germanys model which is willing to give the details of all Indian names in the LGT Bank secret records. Switzerland is not cooperating fully. It is reluctant to give full access to its banking records.

G20 stance
At the London G20 summit on 2 April 2009, G20 countries agreed to define a blacklist for tax havens.

Germany & France have threatened taxhavens like Switzerland with BLACKLISTING them, if they dont co-operate.
Switzerland is under serious pressure to risk black listing or cooperating.

 At first UK did not support this, but public criticism forced UK PM Gordon Brown to change tracks & issue a statement, This is the start of the end. The era of banking secrecy is over. Unfortunately, India has kept quiet.

PRESSURE TO BLACKLIST SWITZERLAND

The US IRS (Internal Revenue Service) fines Switzerlands biggest bank UBS to give records of 300 top tax evaders.

UBS had to pay a fine of $800 million (Rs 4,000 crores). US has asked for 52,000 more such account details. Germany & France threaten to blacklist Switzerland. India must act similarly.

Swiss laws protect the guilty

Switzerland is reluctant to amend its laws. The Swiss Federal Act on international mutual

assistance in criminal matters (1983) and other Swiss laws permit access to bank records only if proved that the money stored is used for criminal activities.

 Richard Murphy, famous British anti-tax haven

consultant, The information exchange agreements dont really make it practical to get information unless you know the name and a/c number of the person
pressure on Switzerland.

India must join other countries and build

The great Indian silence

Germany & France threaten blacklisting of Switzerland. India keeps quiet. Germany and France take the issue of secret banks and tax havens in the G20 preparatory meeting at Berlin In February 2009. India keeps quiet. These two nations and supported by UK and the US raise the voice against secret banks and tax havens in London in April 2009, India keeps quiet.

 govt. offers to open secret names of the account holders in LGT Bank of Liechtenstein. India keeps quiet.
Why India has not effectively worked to get the names of several Indians believed to be in the secret records

India must act

Develop national will & agenda against black money in foreign banks. Get immigration details of the 25,000 frequent travellers to tax havens. Upgrade Financial Action Task Force (FATF) membership to full. Make specific anti-tax haven laws. Publicize entire economic history of overseas account holders.

 Demand

LGT BanK of Liechtenstein's secret records Ensure India friendly global anti-secret banking rules Appoint a special emissary to Germany & Switzerland. Develop a proper Institutional infrastructure to fight the flight-of-capital