India can now follow the black money
Indians love many things about Switzerland: chocolates, watches, Bollywood movie locales and secret bank accounts.
India and Switzerland on Monday signed a pact amending the existing double taxation avoidance agreement, that will make it easier for New Delhi to gain access to information on suspect bank accounts, possibly paving the way to recovering billions of dollars in undeclared wealth.
It is anyone’s guess just how much money is stashed away in secure vaults in the scenic Alps.
The main opposition Bharatiya Janata Party, which made repatriating “black money” one of its election promises last year, estimates there may be some 25,000 trillion rupees, or roughly half India’s GDP of $1 trillion, in secret Swiss accounts.
Other estimates are even higher.
A report from Global Financial Integrity last year said $23-$27 billion in illicit money left India every year in the period 2002-06; some of it to offshore financial centres, and the rest to tax havens and traditional banks including big Swiss banks.
These are not just retirement funds. Besides depriving countries of valuable resources for development, experts warn “black money” is often used to fund militants, and therefore poses a major security risk, as well.
But signing a deal to gain access to this money is one thing, assembling convincing evidence of these accounts is another.
Swiss bank UBS last year agreed to hand over details of more than 4,000 American accounts to the U.S. government for investigation of tax evasion.
But Swiss banking officials, who have long resisted pressure to open up, have already indicated India cannot simply “throw a telephone book” at Switzerland and expect ready cooperation.
What India needs to do is build strong cases against people it suspects are guilty of tax fraud and graft.
It will not be easy, as they may well include politicians and other powerful figures. But with an abysmal ranking when it comes to corruption, India has much to gain from building credible evidence against tax evaders.
India has shown serious intent with the pact; now it needs to demonstrate serious and swift action.