From being an economic powerhouse of the Middle Ages to a third world country in the 21st century, India has surely come a long way… BACK, that is. And it is not without reason that corruption is regarded as the harbinger of poverty in the country. Sample this: In 2006, a Swiss Banking Association Report said that “India has more black money than the rest of the world combined.” Unofficial reports estimate the total sum to be more that a whopping $1,456 billion in black money in Swiss banks. The question to ask is why Indian money goes to the Swiss and not the other way round.
I know enough has been said already about the entire WikiLeaks fiasco and the government has, for now, defused the ticking bomb. Despite making high stake promises, the Government has still not delivered on its commitment. So what did the government do to counter international money laundering by our fraud politicians? Let me introduce you to the Tax Information Exchange Agreement, abbreviated as TIEA.
TIEA is a mutual agreement between two countries which, according to Wikipedia, “provide for exchange of information on request relating to a specific criminal or civil tax investigation or civil tax matters under investigation”. Devised by the OECD (Organization for Economic Co-Operation and Development), the objective of this tax treaty is to establish an official system that facilitates information exchange on matters pertaining to taxes and money laundering, regardless of either country’s definition or consideration of money laundering or tax evasion as a crime. The Agreement was initially strategized to avoid conflicts in case a country needed to access tax information that might be protected by the legal system of another country. In simple terms, if India signs the TIEA with the US, India may request all information pertaining to the investments/deposits made by Indians anywhere in the US. A smart move apparently. But, the results will be insignificant. People will find smarter ways to hide their money.
Now, here’s the catch. The following is the list of countries, ten in total, which India has actually signed TIEAs with:
3. British Virgin Islands
4. The Isle of Man
5. Cayman Island
6. The British Island of Jersey
8. St. Kitts
9. Nevis, Argentina
10. Marshal Islands
Among the above, Monaco has the highest GDP and is a tax haven with minimal business taxes and no income taxes whatsoever. The rest are, with due respect to each, not major players in the international money laundering scene. Most tax evaders still take the Mauritius route when laundering their black money offshore. Now the Government really does take us, the taxpayers, for a ride. The common man is expected to smile and pay up. And pay up, he does, though he is not smiling most of the time. The government could stop the Mauritius route. But is it the intention of government to stop money coming in or to increase it for benefit of all of us? Whatever the government does, it is unlikely that this money ever flows into the government coffers.
The best possible action by the government would be to follow the practices of countries like Switzerland, UAE, Monaco, Singapore, Hong Kong and other countries where foreigners like to park their money. Why constantly try to get money by force? Why, not just reduce taxes, make the rupee fully convertible, allow foreigners to open accounts no questions asked and see investment flow into India for benefit of all us.