The Wikileaks is known for leaking and publishing even the most hidden US military secrets, shocking the entire US government machinery. Wikileaks once threatened that it will publish the details of Indian black income account holders in foreign countries. But, the Julian Assange formed entity never published the list; a testimony to the power of India’s black income account holders.
Now, the Central Bureau of Intelligence has made a soft estimate that black money of India is around Rs 25 lakh crore or nearly US$ 500 billion. The amount is equal to the size for the Indian government to execute two year’s budget without any tax or borrowing, or equal to the size of the government’s total proposed investment in the infrastructure sector for the entire Eleventh five year plan.
Interestingly, the CBI’s estimate is well below the previous estimates. The IMF has estimated India’s black money at around 50% of the GDP or about US $ 2000 billion. National Council of Applied Economic Research has estimated it around 25% of GDP or around US $1000 billion.
Because of the high degree of tax evasion, India is one of the lowest tax receiving country in the world with a tax GDP ratio of 16%, compared to the tax-GDP ratio of 37% in Germany, 34% in the UK and 24% in the US.
Two important factors are promoting individuals and corporate to be tax evaders. First is that there is no effective imprisonment for tax related offences in the country. The highest risk one is embracing as a tax evader is the possibility of penalty, that also if caught by the government.
Secondly, there are ample opportunities to park the illicit funds in foreign countries, especially in the tax havens. Recently, the tax planners have invented a practice called round tripping. Round tripping means, you can park the black income in tax havens by forming (incorporating) a company (shell) there. Then after a time, you may reinvest that money in India itself under the banner of foreign investment. This investment will be exempted from taxation in India as profit out of investment from foreign incorporated companies is not taxable in India (ref: Vodafone case). In the tax haven where, you have parked the money, the tax rate is very low or nil. The double advantage here is that your previous income is not taxed and your present income is also not taxed.
India is not only known for black money, but also for the rapport the black income holders are getting at the institutional level. Last year, the government in the Supreme Court has declined to reveal the names of people having illicit accounts in foreign banks. As a follow suit, the apex court has appointed its own committee under Justice Jeevan Reddy to enquire about black money, despite the already existing government appointed committee under the former CBDT Chairman Sudhir Chandra.
Key word: black money in India, round tripping, 1c-enter.ru, parallel economy, black money estimate- India.
Tags : black money,india black money,india bank deposit,swiss bank money in india