BY D M DESHPANDE
A globally coordinated investigation by media has come out with this fresh revelation-that 1688 Indians have accounts with HSBC bank in Switzerland. However, after accounting for duplication of names and ‘other factors’, number of Indians who might have stashed black money abroad is 1195! Now it is not clear what this ‘other factors’ mean. That apart, even this nearly 1200 list is almost double the number that was disclosed by the French Government in the year 2011. Collectively, the aggregate balance in these accounts stood at $4.1 billion or Rs 25,420 crore as of 2007.
It is doubtful, even now, whether the actionable cases still run up to around 1200, for, one needs to make a distinction between having a legitimate foreign bank account and stashing black money abroad. On top of this list is Swaraj Paul with an amount of $386 million. Since he is not an Indian citizen, he wouldn’t be owing taxes to Indian Government. The same thing, perhaps, holds true for a person who has been given a code name as H P G who according to the said list is a Kolkata-born UK citizen having $133 million in his account. Similarly, the name of late Manu Chhabbria, based out of Dubai, with $141 million appears in this list.
Whereas some in the list have said that they are willing to pay up, others like Ambani brothers have said they have nothing to do with this. Mukesh Ambani’s official stance is that he does not have any illegitimate foreign bank account while Anil has said that he does not have HSBC account in Swiss. If the big fish are out of the net, as they claim to do so, then how much black money remains for the Indian Government and tax authorities to act against is a pertinent question.
All the money in this list, as per an estimate of Indian Express, adds up to nearly $4 billion. If one has to look at the estimate of black money generation in India objectively, then it goes without saying that Baba Ramdev’s figure be kept aside. Also for that matter, the pre-poll assertion of PM Modi that every Indian will be richer by Rs 15 lakh if all the black monies were brought back. The Global Financial Integrity (GFI), headquartered in Washington DC, estimates that the amount is $440 billion, of which $95 billion stashed away in other nations in the year 2012 alone.
There are several doubts about the GFI’s methodology and data. Yet, in the year it highlights as a major one, black money put away was no more than 5% of the Indian GDP. In fact, it is argued that the tax to GDP ratio is on the decline from 11.89 in 2008 to 10.35 in 2013. Had the tax to GDP ratio remained constant, the additional tax revenue that the Government could have got would have been more than offset by the loss due to black money generation.
This, of course, is not to suggest, that the Government view the problem lightly or ignore it altogether. Quite to the contrary, Government could take certain steps like quicker introduction of GST that can reduce the menace of black money to a significant extent, besides adding between 1 to 2% to national GDP. It facilitates establishment of multiple audit trails across the production chain, that can help track black money with evidence and without loss of time. It is necessary to end tax terror and generally make it easy to conduct business.
Removal of incentive to create black money is important. It is bold policy initiatives that ended the era of black money in gold smuggling and havala transactions. Real estate is in urgent need for reforms; it is also the sector that generates huge amounts of black money. India must sign the automatic information exchange pact, a part of the initiative of OECD to end base erosion and transfer of profits by multinational corporations. This is important to deal with complex transactions in a globalised world. Like in UK, the Government should ask the corporates to identify and report their real owners and make the registry public. Transparency is an integral part of the exercise of eradicating the menace of black money.