Whitewashing Black Money

The Polit Bureau of the Communist Party of India (Marxist) has issued the following statement:

 

The Finance Ministry’s White Paper on Black Money presented in parliament reflects a trite exercise devoid of any political will. Neither has any credible estimate of black money stashed abroad been provided by the white paper nor any concrete measures suggested to retrieve the illicit funds.

 

The paper states that the total amount held in the Indian deposits of Swiss Banks fell from Rs. 23373 crore in 2006 to Rs. 9295 in 2010. The government seems to have no clue as to where this amount has gone. There is no assessment of Indian deposits in other offshore financial centres. The paper suggests that much of illicit financial outflows are round-tripped into India through FDI via the Mauritius route or via FII investments through Participatory Notes. Yet there is no specific recommendation to ban Participatory Notes or to scrap the DTAA with Mauritius. 

 

The paper cites the Global Financial Integrity study which estimated the current value of illicit financial flows from India between 1948 and 2008 to be around $462 billion (Rs. 25 lakh crore approximately). The fact that these are not gross overestimates can be seen from the information provided by the white paper: over the last two financial years (2010-2012) alone the Directorate of Transfer Pricing has detected mispricing (such as over-invoicing and under-invoicing of imports and exports) to the tune of a whopping Rs. 67768 crore in 1343 cases. Rs. 48951 crore has also been collected by the Directorate of International Taxation in just two years, between 2010 and 2012. It is clear that these amounts detected or collected over the past two years still comprise the tip of the iceberg. 

 

The white paper reveals that the amounts of undisclosed income of Indians, who figure in the lists of secret bank account holders received from the German and French governments respectively, are Rs. 40 crore and Rs. 565 crore only. These are minor parties. The Indian individuals and entities, who are holding bulk of the illicit wealth in offshore accounts, are yet to be identified. The white paper disappointingly reiterates the myriad technical difficulties involved in retrieving these huge amounts stashed abroad.