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Black money abroad: 'Pay 20% tax to bring it back'
There has been a countrywide uproar over the issue of black money stashed away in various tax havens abroad.
The matter has now snowballed into a major political battle that has entangled the civil society, the government, and the opposition parties, with the pro- and anti-government bodies clearly taking up aggressive positions on either side of the divide.
Disruption of Parliament, fasts, protests and now a government backlash -- the issue has seen a lot of twists and turns without any concrete solution in sight.
The big question is how long will India take to bring back the black money that some Indians have stashed away abroad. The answer, according to an expert, is that if the government seriously pursues the matter then it should take anything between six months and a year to retrieve this money.
Rediff.com spoke with R Vaidyanathan, a professor of Finance at IIM-Bangalore and an expert on this subject. Here is what he has to say:
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Black money abroad: 'Pay 20% tax to bring it back'
"According to Global Financial Integrity -- a non-profit organisation -- the estimated value of illegal financial flows held abroad is around $500 billion.
"While calculating this into Indian money, the amount comes up to a whopping Rs 22.5 lakh crore (Rs 22.5 trillion).
"As per Konrad Hummler, chairman of the Swiss Private Bankers Association, $1 trillion -- out of the $2.8 trillion -- in Swiss banks is black money.
"WikiLeaks founder Julian Assange had also said that a majority of the funds stashed away in the Swiss banks belonged to Indians. This would mean that out of the 1 trillion Swiss francs more than half could be owned by Indians. This alone comes to more than $500 billion (1 Swiss franc = 1.2 US dollars). And this is only bank deposits.
"While these are just statistics, the key question is how do we bring back this money . . . If the government is serious about it then it can very well bring back this money. However, the seriousness of the government in this matter is very crucial in this case."
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Black money abroad: 'Pay 20% tax to bring it back'
"A delegation led by the Prime Minister of India himself must speak with the Swiss officials regarding this issue. However, this need not be in public glare and there is no need to disclose names and things like that.
"The intention should be to bring back the money. Why I am saying that the prime minister should head these talks is because only then will the seriousness of the issue be known to the country in question.
"Now bringing back this money may not seem as easy as it sounds. When we speak with the officials concerned in those countries, we need to tell them to return this money. However, we should also offer to pay 20 per cent tax on the amount while bringing it back. This would make the process easier and also more convincing.
"The other question now would be what happens to the persons who have stashed away their money in these banks.
"If the money is earned through legitimate means then that person could move the Reserve Bank of India and make a claim. He would need to prove that the money that was stashed away was earned through legal means and would have to submit proof for the same.
"However if the money has been earned illegally then he may as well forget about it."
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Black money abroad: 'Pay 20% tax to bring it back'
"When we speak in terms of $500 billion stashed away we should also remember that this money does include some funds which are being used for narcotic trade and also terror funding. It would be very difficult to get this money back.
The reason why it would be difficult is because it is hard to establish the ownership of these funds. It is not possible for India alone to establish the source of the funds. When we speak of the rest of the funds, it becomes easier since that money has been stashed away by businessmen and politicians who have done so with an intention of bringing it back to India.
However, the case of money for terror is not the same and the owner of that money has stashed it away with the intention of circulating it elsewhere. In addition to this, the money for terror and narcotics is stashed away in several layers which makes the establishment of the ownership even more difficult.
Moreover, in such cases, we need to seek consent and help of the United Nations and also the United States. Hence, although it not impossible to bring this money back, it is time consuming and would entail a long process and time."
"Hence, for a start, we may as well bring back the money which has been stashed away abroad by the bigwigs of our country."