The White Paper presented in the Parliament makes a good background reading on various ways of generating black money: the paper focuses on black money generated via non-disclosure to public authorities rather than that generated from illegal activities. Eighteen ways of manipulating accounts to generate black money are highlighted and ‘vulnerable’ sectors like real estate, bullion, Equity Trading, public procurement, transfer pricing and tax havens are identified.
The paper argues that claims of Indians holding US$1.5 Trillion of assets in Swiss / Foreign banks are exaggerated and based on unverified data (the actual holdings are recorded at only Rs9300 Cr or Just $ 2 Billion in FY2010). Can you believe that ? Global Financial Integrity (GFI) report estimated US$1.4 tn of illicit external assets of Indian Politicians, Middlemen / Brokers and Bureaucrats.
Tax on Black Money can Wipe Out Fiscal Deficit: Forget bringing back the $ 1.5 Trillion Politicians has stashed away abroad. The estimates of annual generation of black money (~20% of GDP), effective identification and taxation can lead to meaningful revenue gain for the Government. Assuming it to be a reasonable estimate, at 30% tax rates, this can yield 6% of GDP as tax revenue, wiping off the Government’s fiscal deficit.
Even as various measures are being put in place, the paper identifies political consensus and commitment as the next step, which will take another decade to happen. Only HE can save India from a disaster.