17.2.11

Black Money.

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In the black

Jug Suraiya at the Times of India blog.

Make India the hub of the world's undeclared wealth.

Just how much money has been stashed away abroad by Indians? According to reports there is anything between US$450 billion to $1.7 trillion of Indian money secreted away in undeclared bank accounts spread halfway across the world, from Liechtenstein and Switzerland to Mauritius and the Cayman Islands. If all this moolah was to be brought back to India under an amnesty scheme it would totally transform the country's economy. At one stroke, the entire internal and external debt of the government would be wiped out. Even if only 25% of the money held abroad by Indians were to flow back, it would be sufficient to meet all of India's basic infrastructural needs - power, roads, primary healthcare and primary education - for the foreseeable future.

Sounds too good to be true? It is. Because, despite several recommendations made by tax lawyers and former income tax chiefs, the government is fighting shy of announcing an amnesty scheme along the lines of the Voluntary Disclosure Scheme of the late 1990s which netted some Rs 10,500 crore for the exchequer. In the present case the sum would be far larger, given that India has the distinction of being the world's leading country in terms of undeclared offshore wealth.

Why is the government unwilling to even try and bring this loot back to India, from where it was taken and where it rightly should be returned? The argument given is that of 'moral hazard'. Granting immunity from legal action to the people involved would be morally wrong in that it would be seen as condoning dishonesty at the expense of honesty.

While valid enough in itself, the moral hazard argument sounds more than a little naive in the context of India's increasingly scam-ridden polity. When members of all sectors of society - the politicians, the bureaucracy, the judiciary, the police, the defence forces - seem to be involved in some sort of swindle or the other, our morals could hardly be exposed to any more hazard than they already are. It's time to drop the hypocritical pretence of moral hazard, and make the most of what seems to be the uniquely Indian talent for generating what is popularly known as black money.

India is estimated by various international agencies to have the world's biggest hoard of black money, much of it kept abroad. Instead of being in a state of denial about this reality, the government should see how best to exploit the situation for the benefit of the nation as a whole. Declaring an amnesty for Indian black money in offshore accounts should be the first step. This should be followed by turning the tables on countries like Liechtenstein and the Bahamas which, using the euphemism of 'tax havens', have become repositories of the world's ill-gotten booty, much of which has come from India.

If you can't beat 'em, join 'em. From Adarsh to the ongoing saga of the spectrum scam, there is nothing to suggest that anytime soon India is miraculously going to turn from being one of the most corruption-riddled countries in the world to becoming a model of financial probity. Instead of bemoaning this innate genius that many, if not most, of us seem to have for what might be called highly creative financial management, why not turn this national trait into an asset rather than a liability?

Why should a tiny country like Switzerland be one of the world's most sought-after destinations for undeclared cash? Why shouldn't India, with its huge size and its even bigger reputation for highly sophisticated financial jugglery, take its place? In tandem with Incredible India for tourism, we should promote India as the most desirable and safest address for clandestine assets and watch the world's hidden wealth pour into our coffers. Black is the colour of ill-gotten gains. But it's also the colour found on the profit side of the ledger. The ledger of Indelible India?

Make India the hub of the world's undeclared wealth.

Just how much money has been stashed away abroad by Indians? According to reports there is anything between US$450 billion to $1.7 trillion of Indian money secreted away in undeclared bank accounts spread halfway across the world, from Liechtenstein and Switzerland to Mauritius and the Cayman Islands. If all this moolah was to be brought back to India under an amnesty scheme it would totally transform the country's economy. At one stroke, the entire internal and external debt of the government would be wiped out. Even if only 25% of the money held abroad by Indians were to flow back, it would be sufficient to meet all of India's basic infrastructural needs - power, roads, primary healthcare and primary education - for the foreseeable future.

Sounds too good to be true? It is. Because, despite several recommendations made by tax lawyers and former income tax chiefs, the government is fighting shy of announcing an amnesty scheme along the lines of the Voluntary Disclosure Scheme of the late 1990s which netted some Rs 10,500 crore for the exchequer. In the present case the sum would be far larger, given that India has the distinction of being the world's leading country in terms of undeclared offshore wealth.

Why is the government unwilling to even try and bring this loot back to India, from where it was taken and where it rightly should be returned? The argument given is that of 'moral hazard'. Granting immunity from legal action to the people involved would be morally wrong in that it would be seen as condoning dishonesty at the expense of honesty.

While valid enough in itself, the moral hazard argument sounds more than a little naive in the context of India's increasingly scam-ridden polity. When members of all sectors of society - the politicians, the bureaucracy, the judiciary, the police, the defence forces - seem to be involved in some sort of swindle or the other, our morals could hardly be exposed to any more hazard than they already are. It's time to drop the hypocritical pretence of moral hazard, and make the most of what seems to be the uniquely Indian talent for generating what is popularly known as black money.

India is estimated by various international agencies to have the world's biggest hoard of black money, much of it kept abroad. Instead of being in a state of denial about this reality, the government should see how best to exploit the situation for the benefit of the nation as a whole. Declaring an amnesty for Indian black money in offshore accounts should be the first step. This should be followed by turning the tables on countries like Liechtenstein and the Bahamas which, using the euphemism of 'tax havens', have become repositories of the world's ill-gotten booty, much of which has come from India.

If you can't beat 'em, join 'em. From Adarsh to the ongoing saga of the spectrum scam, there is nothing to suggest that anytime soon India is miraculously going to turn from being one of the most corruption-riddled countries in the world to becoming a model of financial probity. Instead of bemoaning this innate genius that many, if not most, of us seem to have for what might be called highly creative financial management, why not turn this national trait into an asset rather than a liability?

Why should a tiny country like Switzerland be one of the world's most sought-after destinations for undeclared cash? Why shouldn't India, with its huge size and its even bigger reputation for highly sophisticated financial jugglery, take its place? In tandem with Incredible India for tourism, we should promote India as the most desirable and safest address for clandestine assets and watch the world's hidden wealth pour into our coffers. Black is the colour of ill-gotten gains. But it's also the colour found on the profit side of the ledger. The ledger of Indelible India?