White Paper on Black Money
THE Finance Minister Pranab Mukherjee tabled the much awaited White Paper on Black Money in Parliament yesterday. According to the White Paper, at the end of 2010, liabilities of Swiss Banks towards Indians and Indian Companies, i.e., the amount of money stashed by the Indians in Swiss Banks is a mere Rs 9,295/- crores. (and more than that he is any way going to get back from Vodafone) According to the White Paper, this is 0.1302% of the total liabilities of Swiss Banks towards all countries. (India is not, after all that black a country!) Some highlights of the White Paper:
Black Money synonyms:
‘unaccounted income', ‘black income', ‘dirty money', ‘black wealth', ‘underground wealth', ‘black economy', ‘parallel economy', ‘shadow economy', and ‘underground' or ‘unofficial' economy.
How Black Money is generated:
Black Money is generated through - Out of Book Transactions, Parallel Books of Accounts, Manipulation of Books of Account, Manipulation of Sales/Receipts, Under-reporting of Production, Manipulation of Expenses, Manipulation by way of International Transactions through Associate Enterprises, Manipulation of Capital, Manipulation of Closing Stock, Manipulation of Capital Expenses, Land and Real Estate Transactions, Bullion and Jewellery Transactions, Financial Market Transactions, Public Procurement, Non-profit Sector, Informal Sector and Cash Economy, External trade and Transfer Pricing, Trade-based Money Laundering (TBML), Tax Havens, Offshore Financial Centres, Investment through Innovative Derivative Instruments.
Estimates of Black Money stashed abroad - you got it wrong: The White Paper tries to clean some black marks. The Paper says:
2.6.1 A chain Email, which first started circulating on the Internet in early 2009, states that Indians have more money in the Swiss banks than all other countries combined. It claims that as per a Swiss Banking Association report in 2006, bank deposits in the territory of Switzerland by nationals of a few countries are as under: India, USD1456 billion, Russia, USD 470 billion, UK, USD 390 billion, Ukraine, USD 100 billion, China, USD 96 billion.
2.6.2 It is now evident that there is no organization by the name of Swiss Banking Association, although there is a Swiss Bankers Association (SBA). On 13 September 2009 Zeenews.com reported a statement from James Nason, Head of International Communications of the SBA, in which, referring to figures being quoted based on the alleged SBA report, he asserted that the SBA had never published any such report and that the story about Indian deposits was a complete fabrication. Thus, these figures appear to be a figment of the imagination and the email circulating them baseless and mischievous in intent.
Bank Deposits decreased from 2006:
It is however useful to mention here one estimate of the amount of Indian deposits in Swiss banks (located in Switzerland) which has been made by the Swiss National Bank. Its spokesperson stated that at the end of 2010, the total liabilities of Swiss Banks towards Indians were 1.945 billion Swiss Francs (about Rs 9,295 crore). The Swiss Ministry of External Affairs confirmed these figures when a reference was made by the Indian Ministry of External Affairs to them. Since the information was publicly available on the website of the Swiss National Bank, the figures of earlier years were also taken and are tabulated in Annexure Table 1. From this Table, it can be seen that bank deposits of Indians in Swiss banks have decreased from Rs 23,373 crore in year 2006 to Rs 9,295 crore in year 2010.
Vodafone in White Paper:
The Vodafone tax case provides an instance of the misuse of corporate structure for avoiding the payment of taxes. In this case, the Hutchison Group had made investments in India from 1992 to 2006 through a number of subsidiaries having ‘separate corporate personality' but which were essentially post box companies based in the Cayman Islands, British Virgin Islands, and Mauritius. The Hutchison Group sold its entire business operation in India in February 2007 to the Vodafone Group for a total consideration of USD 11.2 billion and the same was effected through transfer of a solitary share of a Cayman Islands company. When the tax authorities requested the accounts of the said company, the answer given was that as per Cayman Islands law, the company was not required to prepare its accounts.
(And the answer given by the Indian Tax authorities is mind blowing!)
The White Paper lists out various agencies that can unearth black money and the Frame work for tackling the menace of black money and refers to various reports and Committees. The other day a layman was mentioning that the best way to reduce black money is to do away with currencies of higher denominations. A few weeks back, Rs 35 crores were recovered from a house in Chennai and the currency was found to be neatly packed in 35 bundles.
Committee of Black Money? Do Institutions deal with black money?
The index to the White Paper has some humour. It refers to the Committee on Black Money as “Committee of Black Money” and lists out various “INSTITUTIONS TO DEAL WITH BLACK MONEY”
The white paper on black money is a colossal waste of precious paper – how many copies of the sanctimonious document have been printed and distributed and in the next few days, tons and tons of paper will be gobbled up to discuss the white paper on black money.
And what great revelations have been made by the white paper, which we all did not know, except the fact that the CBDT has 740 buildings spread over 510 cities and towns with over 55,000 employees.
Please also see White Paper on Black Money - Why this Drama? in DDT 1753 – 15.12.2011
Please also see White Paper on Black Money presented by FM in Lok Sabha