Money stashed by Indians in Swiss banks swells by 50%; Goyal promises action, Cong slams Modi

Dinesh Unnikrishnan
Black money is known as illicit financial flows (IFFs) internationally, which are defined as a cross-border movement of funds that have been illegally or unethically earned, transferred or utilised

Funds stashed, by Indian moneybags, behind the 'impregnable' walls of Swiss banks swelled by over 50 percent to CHF (Swiss franc) 1.01 billion (Rs 7,000 crore) in 2017, the PTI reported  citing official annual data released by the Swiss National Bank (SNB), the central banking authority of the Alpine nation.

This is after Indian money in Swiss banks fell by 45 percent in 2016, marking their biggest ever yearly plunge, to CHF 676 million (about Rs 4,500 crore) €" the lowest ever since the European nation began making the data public in 1987, the report said.

In 2015, the money held by Indians in Swiss banks had fallen by nearly one-third to CHF 1,217.6 million (over Rs 8,000 crore). Prior to that, these funds fell by 10 percent to CHF 1.8 billion in 2014, after a rise of 43 percent in 2013 to CHF 2.03 billion, the report added.

Now, it is incorrect to assume that all the money deposited in Swiss banks is black. Part of it could be legit. But, most governments and investigative agencies across the world do not believe so; they use the term 'suspected black money' when they refer to Swiss bank deposits.

This is mainly because of the kind of secrecy Swiss banks offer their customers and because of their notorious reluctance to share details with authorities of other countries. That's exactly why someone goes to a Swiss bank with their ill-gotten wealth and parks his/her money there, paying a hefty premium for secrecy that is not offered in most other financial institutions the world over.

But, Swiss banks are just one of the tax havens; there are many, such as Singapore and Mauritius. Considering this, let's assume that a big chunk of the Rs 7,000 crore is illicit money. A major spike in Swiss deposits is a major setback for this regime and proves to be a major setback to the government's much-hyped efforts to bring back black money from foreign lands. Remember, when the Narendra Modi-led government assumed power in May, 2014, one of its biggest promises was that it would bring back black money stashed in foreign tax havens.

The government initiated a two-pronged attack against black money stashed in India and on foreign soil. As part of the domestic hunt, the government announced the world's biggest-ever currency scrapping programme, in November, 2016, demonetising Rs 500 and Rs 1,000 notes constituting 86 percent of the currency in circulation (CIC); ordered government agencies to track down benamis; cracked down on shell companies, and commenced a large scale scrutiny of bank deposits.

These were steps in the right direction but there hasn't been any major black money recovery so far. That's except a relatively smaller amount of less than Rs 5,000 crore through amnesty like schemes and about Rs 17,000 crore the IT sleuths recovered through raids. This is contrary to the black money recovery figures Modi himself claimed in his Independence Day speech, last year.

But, compared to what is at stake abroad, the portion of domestic black money is only a fraction for India. According to R Vaidyanathan's Blackmoney and Tax Havens, the amount of money Indians have stashed in tax havens could be around Rs 65 lakh crore. Whereas, the amount of domestic black money is estimated to be around Rs 15 lakh crore, a good amount of which could be in the form of assets such as real estate and financial investments.

Now, what did the Modi government do to recover foreign black money? As part of the foreign black money operations, the government kicked off a series of negotiations with major tax havens through diplomatic channels, using a mix of nudging and bargaining tactics. The idea was to discourage the tax cheats from India from seeking the safety of Swiss-bank like institutions to hide their ill-gotten wealth and share details of those whose money is already stashed in their lockers.

The Narendra Modi government indeed made certain progress when Switzerland agreed to share some information from 1 January, 2018. But even after four years of engaging with Swiss authorities, the fact that Indians have increased their exposure in Swiss banks by 50 percent tells us a different story. It's just not only about Swiss accounts; there have been multiple data leaks on tax cheats from time to time through the international media. But, there has been very little progress in India that has translated into black money recovery €" be it the Panama Papers, the HSBC list of tax evaders and the more recent Paradise papers.

The government maintains that probes are on but tax cheats are way too smart €" they manage to outrun the sleuths with their sound understanding of the art of camouflage. For instance, a Special Investigation Team (SIT) instituted by India couldn't make much progress after it found that less than half of the HSBC bank's list of over 600 accounts did not have any money while more than a hundred names on that list were repeated, hampering the possibility of any action against them.

To sum up, tax cheats from India are least perturbed by the coercive tactics, threats and proposals for amicable settlement floated by the government and continue to rely on tax havens for they consider havens to be a better option. In this backdrop, the latest Swiss numbers are a major setback to the Modi government's war on black money.

Swiss Bank deposits info will be available as of 2018: Goyal

New Delhi, June 29 (IANS) Data of money deposited by Indians in Swiss banks will be available to the government under an agreement signed with Switzerland for automatic exchange of information, Interim Finance Minister Piyush Goyal said on Friday.

The agreement for automatic exchange of information was signed between Switzerland and India last November under which both countries would start collecting data in accordance with the global standards in 2018 and exchange it from 2019, Goyal told reporters here on the sidelines of an Institute of Cost Accountants of India event.

He was responding to media questions on latest data released by the Swiss National Bank showing a rise in Indian deposits last year.

"Under an agreement signed by the Modi government with Switzerland, all this data from the period January 1, 2018, will be made available to us," Goyal said.

"From what I understand (from media reports) 40 per cent increase in foreign remittances are on account of the Reserve Bank's Liberalised Remittance Scheme brought during the previous (UPA) government under which a resident Indian can remit $250,000 per year," he said.

"Then there are also non-resident deposits in this. Rest assured, if there is any wrongdoing revealed, we will take action. With the various measures of this government against black money, Swiss bank deposits have been decreasing," he added.

The data showed that after falling for three years in succession, money parked by Indians in Swiss banks rose 50 per cent to Swiss Franc 1.02 billion in 2017 over the previous year.

Over the last three years among the measures taken by the Indian government to combat black money include the enactment of Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Income Declaration Scheme in 2016 and the Pradhan Mantri Garib Kalyan Yojana last year.

'While voters wait for Rs 15 lakh...': Congress slams Modi govt

Prime Minister Narendra Modi's campaign promise to bring back unaccounted wealth stashed abroad has fallen flat, the Congress said Friday, citing a news report on increased Indian funds in Swiss banks.

"While you sit and wait for your promised Rs 15 Lakh, more capital has flown the coop," the Congress tweeted.

In the run up to the last general elections, Modi said every Indian would receive Rs 15 lakh when black money was brought home from abroad. In April this year, the Prime Minister's Office said an RTI query asking when this money would be deposited didn't come under the definition of "information" under the Right To Information Act.

But by how much did Indian funds in Swiss banks increase last year?

The answer: Over 50 per cent -- a reversal of a three-year downward trends.

And the number stands out -- for by comparison, the total funds held by all foreign clients in Swiss banks increased by just 3 per cent in 2017.

Other Opposition voices slammed the BJP over the report. Even Subramanian Swamy, a BJP MP, mentioned the increase in Indian funds in a tweet, and appeared to blame Finance Secretary Hasmukh Adhia.

Piyush Goyal, a top minister in the Modi government, said India and Switzerland had agreed that all data from January 1, 2018 till the end of the accounting year would be made available.

"So why assume this is black money or illegal transactions?" he asked. (India Today and ANI)