Black Money

Black Money- Dr. Subramanium Swamy

Definition: Flow of black money and stock of black money.

Stock – In your house, under your pillow or abroad (nearly Rs. 65 lakh crore)

Flow – (Rs. 15-30 lakh crore per year)

How black money enters in to the country?

Not through elections.

Soviet Economic model of quotes and licenses, which were administratively priced (e.g. - contractors access to ministers for lobbying to get quotas/licenses)

P V Narasimha Rao abolished quotas/licenses at one blow.

Growth rate surged to 8% from 3-4%.

The policies were designed by Dr.Subramanium Swamy under Finance minister, Dr. Manmohan Singh. But the credit was given to Dr. Manmohan Singh not swami for the blueprints provided.

Electoral success depends on the economic reforms and a bit of emotional quotient.

Certain institutions made black money untraceable, like Mauritius route. Mauritius, given a special status that anything of a Mauritius company will be exempt from tax. Companies registered in Mauritius, trade in India, no tax vis-à-vis capital gains tax of 25%. (Maybe)

Participatory Notes (P-Notes) – where black money goes out of the country-converts to bank deposits through Hawala-this cash is provided before the counters of Morgan Stanley or any other financial institutions, in return they give you a P-Note-these financial Institutions based out in Mauritius trade in Indian stock markets. So no capital gains tax and the money becomes white.

75% of the luxury items consumed by the rich only.

Hawala, a risk of money falling in wrong hands.

Terror financing, the biggest beneficial of Hawala/P-Notes.

Then, what is the way out?

German way, of bribing the bank officials’ to get information about the a/c holders.

French, also followed the same way. Americans threatened the bank officials.

The simplest way followed by Egypt, to get Mubarak’s a/c, Libya to get Gaddafi’s a/c, Philippines to get Marco’s a/c was the route through the United Nation’s Convention Against Corruption, of 2005.

India signed this convention partly. It requires an ordinance to be passed in the Indian parliament to get full access this Convention.

United Nations will help India find all the Indians a/c with any countries hassle-free.

$1 Trillion estimated black money parked outside.

Why not do it? – Finance ministry stresses in DTAA (Direct Tax Avoidance Act)

Other ways to raise resources would be,

2G spectrum- Rs.3 Lakh Crore, Rs.4 Lakh Crore next year (after auction)

3G, 4G auction,

Coal blocks- Rs.11 Lakh Crore

Total Income Tax revenue collection – Rs.5 Lakh Crore

To gain confidence in the economy, abolish Income tax, only one tax GST of 8% across.