The former banker has gone on record saying that all those willing to put their unaccounted money in a Swiss bank need not travel to Switzerland. Investment managers of Swiss banks are active in India to help out the people and deposit their illegal money in the banks. What he says seems to be one hundred per cent correct. Some Swiss banks reportedly have their agents in India and operate through many Indians to facilitate the opening of  accounts and depositing of black money. There is no reliable estimate of the huge amount of money taken away from India, the United Kingdom, Russia, China and Ukraine and deposited in the Swiss banks and other tax havens.

The Swiss Bankers’ Association representing all banks in the country has disputed the amounts being quoted by various sources and attributing these to the Swiss National Bank, the country’s national bank which is the counterpart of the Reserve Bank of India (RBI). It says that the Swiss National Bank is not in possession of details of any such accounts. Nor is the Swiss Bankers’ Association in possession of any correct information about the amounts deposited in secret accounts by Indians or people from other countries. However knowledgeable people are of the view that dishonest Indians are far ahead of their counterparts from Russia, China, Ukraine, the United Kingdom and other countries when it comes to hoarding money in secret accounts. India is estimated to have deposits of 1,456 billion US dollars followed by Russia with 470 US dollars, UK with 390 billion US dollars, Ukraine with 100 billion US dollars and China with 96 billion US dollars.

The former banker has also gone on record saying that 432 crore is deposited in the Swiss banks. However, informed people who specialise in the subject assert that the amount is 1.2 lakh crore.

It is indeed embarrassing for any country to top the list of black money bank account holders. The money undoubtedly belongs to the Indian nation but is stashed in the illegal personal accounts of corrupt politicians, IRS, IPS officers and industrialists who have amassed this through illegal means. This amount is stated to be 13 times larger than the nation’s foreign debt. Every year this amount is increasing at a rapid pace but the Indian government has been relatively silent on this matter for a very long time and has reportedly made some half hearted efforts under public pressure to unearth the accounts. The total black money accounts for 40 per cent of the Gross Domestic Product (GDP) of a nation where more than 450 million people live Below the Poverty Line (BPL) who each make less than 1.25 US dollars per day. By bringing back this black money to the country, developmental programs can be launched for this less fortunate section of the Indian society. With the return of this money, India will also be able to clear all its foreign debts. Besides this, with the return of this money, the Government of India can comfortably abolish all existing taxes and run the country for at least 30 years.

It has been found that about 80 thousand people travel to Switzerland every year on tourist visas and official assignments. And of them, an estimated 25 thousand persons do so on a frequent basis. Such frequent travelers must be doing so for some reason and the Indian intelligence must be aware of these people. Reasons for these visits should be found out.

Indian money stashed in the Swiss Bank has remained a focal point of debate, especially among the intellectuals and the Opposition has berated the Government for its inability to bring back the black money. The Government has expressed difficulties in compelling the Swiss Government to disclose the names of the account holders. Swiss banks have refused to oblige India on the plea of their prevailing banking legislations. As debates continue over the exact amount of the deposits, Professor R Vaidyanathan of the Indian Institute of Management (IIM) in Bangalore recently stated in an article that according to  the most recent Global Financial Integrity study published in 2006, developing countries lost an estimated Rs 43 lakh crore to about Rs 51 lakh crore in illicit financial outflows. Even at the lower end of the range of estimates, the volume of illicit financial flows coming out of developing countries increased at a compound rate of 18.2 per cent over the five year period analysed for the study. On an average for the five-year period of this study, Asia accounts for an estimated 50 per cent of overall illicit financial flows from all developing nations.

This report shows that the average amount stashed away from India annually during 2002-06 is about 136,466 crore. This means that during the five-year period the amount stashed away is roughly 27.3 x 5 = 136.5 billion (about 692,328 crore). It is not that all this illegal money went to Swiss banks; it has undoubtedly gone to different tax and secret shelters.

The share of Swiss banks in dirty money of the global aggregate, some $45 billion out of the 136.5 billion stashed away from India would have been hoarded in these years in Swiss banks. The important point is that this is only for five years. More amounts were stashed away during the Nehruvian regime. So the loot for 55 years will be several times higher. In fact, in those days the rupee commanded a better value per dollar. So the estimate that the Indian money stashed away may be of the order of about Rs 71 lakh crore, professor R Vaidyanathan asserts. He admits that there is a lot of literature available on the illicit financial flow from developing countries. “We find out what the nature of the flow is. I have also relied upon the study Illicit Financial Flows from Developing Countries: 2002-2006 Global Financial Integrity authored by Dev Kar and Devon-Cartwright Smith, a project of the Ford Foundation. Financial flows in the context of this report includes the proceeds from both illicit activities such as corruption (bribery and embezzlement of national wealth), criminal activities and the proceeds of business that become illicit when transported across borders in contravention of applicable laws and regulatory frameworks, most commonly to evade taxes,” he says.

There are presumably more than 70 tax havens in the world where the ill-gotten wealth of Indian businessmen and politicians is stashed. The amount of Indian wealth stashed in secret accounts could be more in Switzerland and various British and US islands. At least 40 countries market themselves aggressively as tax havens, according to Internal Revenue Service of USA on Abusive Off-shore Tax Avoidance schemes. Some of the well-known tax havens are Switzerland/ Liechtenstein/Luxemburg/ Channel Islands etc.

There are several methods and reasons for secret overseas accounts such as under invoicing and over invoicing of exports and imports and getting the balance stored abroad. Kickbacks from major defence and civilian contracts are also deposited in such accounts and these illicit earnings are not brought from abroad. In the olden days, there was smuggling of gold and illegal money. Transactions are done abroad and not reported back home. Funds earned by artistes and the entertainment industry and also sports people are very often stashed abroad. When you want to indulge in adharma, hundreds of ways are open, Professor Vaidyanathan says.

This issue should be put on the Global Agenda including that of the G-20 Summit as well as on the agenda of the International Monetary Fund (IMF). When a family is in deep financial crisis then it tries to look at the small amount saved under the sugar jar by grandma. In the same way, developed economies are desperate for every dollar.

This issue attains mammoth proportions as it is likely that the list of account holders, if it is made public, will see the inclusion of the whos who of the political and industrial sections of the Indian population. This will have unimaginable repercussions. Once this list is out, the guilty should be brought to book regardless of their monetary or political standing and steps should be taken to prevent another dilemma of the same sort.

The Government of India has picked up flak in the matter and there is talk of India lacking the political courage to ask the Swiss Government to disclose the details of the illegal money in its banks while at the same time making lukewarm efforts in this regard to fool the gullible public. Suspecting the Government’s credibility, a Public Interest Litigation (PIL) has been filed in the Supreme Court of India in this regard.

Yielding to adverse public opinion and pressure mounted by the opposition parties as well as slamming by the Supreme Court of India, Prime Minister Dr Manmohan Singh has entrusted his Finance Minister and veteran Congress leader Pranab Kumar Mukherjee with the unpleasant task of defending the government’s stand on the unaccounted money deposited in the Swiss Banks since 1947 although the issue is sub judice in the country’s highest judiciary through a PIL. The seasoned politician and administrator with an impeccable track record faced the media persons in New Delhi on the eve of the 52nd Republic Day. However, he could not impress the opposition, nor are the knowledgeable people satisfied with the steps being taken to deal with the monster.

Barely two days after the Finance Minister’s public statement on the issue related to black money which is estimated at 70 lakh crore INR or equivalent to 1.4 trillion US Dollars (USD) as against 1.25 trillion USD of India’s latest annual Gross Domestic Product (GDP), the Supreme Court observed that it should not be viewed from the taxation point of view only. The two judge bench observed that taxation is not the only issue. There are other grave issues which only add to the gravity of the situation at hand. It said the Government of India is aware of some names but it has not set the relevant law in motion against them.

“Is there no basis to figure out black money? What is the source of black money which is stashed away in foreign banks? Does such unaccounted money help arms deals, drug peddling and smuggling?” asked the court which has sought explanation from the government saying “These are serious issues.” It also wanted to know what the government has done about those names received so far. Earlier, the Court had asked the government why it could not disclose the names of the people who had black money in foreign banks. It had also asked the Government whether it had access to only 26 names of black money hoarders in foreign banks as shared by German authorities in 2008. Pranab Mukherjee said that all efforts were on to ascertain details of people having black money abroad. He further stated that the Central Government has nothing to hide on the black money issue and the Prime Minister has asked him to share the information on the issue with the public. However, he claimed that so far the Government has no reliable estimate of black money which can be anywhere between 500 billion USD and 1400 billion USD.

A current study conducted by Global Financial Integrity has estimated the present value of illicit money outflow from India at 462 billion US Dollars. Emphasising that there is no reliable estimate of black money generated by Indians within and outside the country, the Finance Minister has rightly said “It is necessary to find out sources of black money so that its generation can be prevented. The Swiss bank has been persistently refusing to divulge information on black money. I have signed an agreement with Swiss authorities. We will be able to get information from Swiss banks by amending the double taxation norms.”

India has amended the Double Taxation Avoidance Agreements with 23 countries which will enable it to seek banking information and India is updating laws on transfer pricing mechanism to bring it at par with international standards as part of attempts to bring back the unaccounted money stashed abroad, said Mukherjee. India has started receiving information on its citizens who have generated income outside the country under the Double Taxation Avoidance Agreements. Besides, toying with the idea of granting amnesty to the illicit account holders in Swiss banks, the Government has constituted a multi-disciplinary committee to get studies conducted to estimate the quantum of illicit funds generated by Indians. The Government has formulated a five- pronged strategy which consists of joining the global crusade against black money, creating an appropriate legislative framework, setting up institution for dealing with illicit funds and developing systems for implementation.

However, this has been looked upon as another indication of the policy of the proverbial carrot and the stick which is favoured by the UPA government and several economists to deal with this issue. “United States of America and some other European countries have been able to get information on unaccounted money deposited by their citizens from the Swiss authorities. Why can’t India do the same?” CPM leader Sitaram Yechury asked the government.

As the embattled Government is trying to convince the people about the steps being taken to unearth the illegal money holders in Swiss banks, Indian corporate leaders have joined the chorus saying that their Government needs to do much more to curb the menace. “To the extent that they can not get the information without filing proper cases in India, I agree with the government. But I don’t know why they are not following these cases,” said Rahul Bajaj, Chairman, Bajaj Group. This leading industrialist says that one of the main reasons for the generation of black money can be attributed to the high taxation levels in India.

“The Finance Minister has spoken about the five-pronged strategy to curb the generation of black money. The question remains whether the Government will ever be able to retrieve the black money   kept in foreign banks,” Mr Bajaj said. He seems to be right as the Government lacks political courage and as is apparent, many bigwigs are involved in the money laundering.

Pranab Kumar Chakravarty