WHITE PAPER ON BLACK MONEY - REMAINS UNDER THE TABLE

By Ruma Dubey

The much anticipated white paper on black money came to light yesterday and it seemed as though the paper was just white – leaving the paper white with big, wide gaping holes.

The biggest question was left unanswered – what is the estimation of black money in India? There was absolutely no ‘official’ word about it in the white paper. Well, this is again typical of the blundering UPA which always leaves things in the dark. So in a sense this white paper was a damp squib because it did not reveal anything which we already did not know.

Almost every Indian, whether living in India or abroad knows that real estate where till date the concept of 60:40 is rampant and jewellery, where transactions are in cash, with no questions asked are probably the best way to “make” black into white. And our Finance Minister enlightened us with the same.

The White paper lists the main areas where black money gets spun as - cash transactions in realty, jewellery and bullion; under invoicing and over invoicing external trade; maintaining two books of accounts to manipulation of sales and expenses, transfer pricing arrangements.

Though the Govt has been silent about the estimations, the unofficial word out is that around $1.5 trillion is black money, in India and abroad. The only figure as such which we get on the number is that of estimations put forth by IMF and Global Financial Integrity (GFI) included in the White paper. IMF study estimated the black money during 1971-97 at $ 88 billion and GFI, which s more current as its report was out in 2010, pegged the figure at $213.2 billion and after earning interest and other income on this fund, it is expected to have burgeoned to $462 billion. The FM has promptly labeled this as “fantasy” but did not bother to bring the reality into picture. He merely stated that the report of GFI does not take into account the money which was repatriated back and thus expects the figure much lesser. This is being an ‘ostrich’ burying the head in the sand.

But what the white paper does tell us is that huge investments coming in from Mauritius and Singapore, around $54 billion and $12 billion respectively, between FY01 and FY11 could hint that the black money re-entering India as “white”. The paper has stated these economies are not big enough for such huge investments and hence it had to be money being routed into India through these two countries to avoid tax. It also helps conceal the real identity of the investors, who in all probability could be Indians, taking this way to avoid tax.

This entire process is known as round-tripping and a practice which the entire world follows for tax evasion and money laundering. It is also known as round-trip transactions or “Lazy Susans” and the Wall Street Journal has defined it as ‘a form of barter that involves a company selling “an unused asset to another company while at the same time agreeing to buy back the same or similar assets at about the same price’.

There was also anticipation about getting the estimation of money stashed in Swiss bank accounts. Somewhere, in all our common people’s mind, black money was equal to Swiss accounts and there one was curious to know that figure. But the White paper cut out wild imagination at the root, stating that Indian holdings in Swiss accounts are grossly exaggerated. In 2010, the Swiss Ministry of External Affairs confirmed  to the Indian Ministry of external Affairs that the deposits in Swiss banks is around Rs.9295 crore as at end of 2010. The White paper, reading between the lines, suggests that black money held abroad might be less than $213 billion and it is down 60% between 2006 and 2010. What one has to infer from this is that people stashing money in Swiss accounts were forewarned when all hue and cry was made about the money there and since then have expeditiously removed money from there to somewhere else. And this the Govt proudly proclaims as having come down 60%! This is naivety or stupidity or sheer politics?

How to lessen if not eradicate this disease of black money? The White paper suggest the obvious - Lok Pal Bill, Public Procurement Bill , a Bill to protect whistle-blowers, electronic payment and reporting pre-conditions for registering property, encourage usage of credit and debit cards, Rationalise tax rates, cut transaction costs for compliance and administration, GAAR, Double Tax Avoidance Treaties.

Well, the BJP was right in calling this White paper a ‘bikini’ , concealing all the essential and revealing the non-essential!