Black and white

Jug Suraiya
11 March 2014, 09:49 PM IST

The upcoming elections will ensure that some of the Indian money stashed abroad will return

Narendra Modi has joined the chorus of politicians who've promised to bring back from foreign accounts the huge amounts of undeclared money stashed there by tax-evading Indians. One can only hope that, if elected PM, the Gujarat 'strong man' will prove successful while so many others before him who've sworn to achieve the self-same objective have failed to do so. In fact, the upcoming elections will see to it that some of this cash is brought back to India, but not in the way Modi means.

According to the Global Financial Integrity report of 2012, Indians are among the world's biggest holders of undeclared wealth kept in numbered bank accounts in countries like Switzerland whose confidentiality laws regarding financial matters make it virtually impossible to detect such clandestine funds, much less bring the money back to the country of origin. According to reports, there is over $230 billion of Indian money lying buried in overseas banks.

So far, the attempts made by the Indian authorities to trace and retrieve this huge wealth have failed. Most recently, the Swiss finance minister has written to his Indian counterpart that Switzerland is not obliged to divulge to New Delhi details about bank account holders in that country.

So-called 'black money', undeclared cash, particularly when it's parked abroad, is an enormous drain on the Indian economy which it can ill afford, particularly now when its growth rate has slowed alarmingly. So what's the solution to black money hoarded in foreign countries which the sarkar can't legitimately bring back?

One solution to black money might be to ensure that it never gets created in the first place. The cause of black money is taxation. Indians are allergic to paying taxes, understandably so perhaps considering that, unlike in other countries, the taxpayer doesn't get any benefits like social security or government healthcare.

Despite this, Indians are among the most heavily taxed people in the world, if you take into account all the hidden taxes, like sales tax, and octroi, and VAT. While India's tax net catches all the small fish — you and me — who willy-nilly pay all these taxes on a daily basis, often without even realising it, the big fish find loopholes in the net and siphon their untaxed wealth onto foreign shores.

India has one of the most complicated tax systems in the world, which is also the most inefficient. Simplifying the system by doing away with multiple taxes would increase efficiency in collection.

If black money were to be reduced, if not eliminated, all business would prosper. Except for politics, which is the one dhandha most dependent on black money, particularly now with elections looming and all political parties seeking to fill their campaign coffers with booty with which to woo voters.

So when politicians, be it Modi or finance minister Chidambaram, say that black money lying abroad will be brought back to India, they are absolutely right. A lot of it will indeed be brought back to fund election campaigns in the form of so-called 'reverse hawala'.

In our rainbow republic of many hues, black and white merge to form the grey area that is India's democracy. If black money did not exist, our vote-seeking politicians would have had to invent it.

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