FAQ on the – Tax Havens

published on March 31, 2009

By  Prof R. Vaidyanathan;

a)      Which are the various tax havens, where the ill-gotten wealth of Indian businessmen and politicians is stored?

There are presumably more than 70 Tax havens in the world. Indian wealth could be more in Switzerland and various British /US islands. At least forty countries market themselves aggressively as tax havens [Source: Internal revenue Service USA on Abusive a Off-shore Tax Avoidance schemes –Talking Points Jan 2008]

The well known Tax Havens are Switzerland/ Liechtenstein/Luxemburg/ Channel islands  etc

b)       How much Indian money do you think would be locked away in Swiss banks? What is the basis for the estimate you make?

Illicit Financial Flows from Developing

Countries: 2002—2006

Authors DEV Kar and Devon-Cartwright Smith


Source: http://www.gfip.org/storage/gfip/executive%20-%20final%20version%201-5-09.pdf


Financial flows in the context of this report includes the proceeds from both illicit activities such as corruption (bribery and embezzlement of national wealth), criminal activity, and the proceeds of licit business that become illicit when transported across borders in contravention of applicable laws and regulatory frameworks (most commonly in order to evade payment of taxes).


1)      In 2006, the most recent year of the Global Financial Integrity-[GFI] study, developing countries lost an estimated $858.6 billion  to $1.06 trillion in illicit financial outflows.

2)      Even at the lower end of the range of estimates, the volume of illicit financial   

flows coming out of developing countries increased at a compound rate of 18.2 percent over the 5 year period analyzed for the study.

3)      On average, for the five-year period of this study, Asia accounts for   

approximately 50 percent of overall illicit financial flows from all developing countries.


4) This report shows that the average amount stashed away from India annually during 2002-06 is $27.3 billion. It means that during the 5 year period the amount stashed away is 27.3×5=136.5 billion. It is not that all these amounts had gone to Swiss. It has gone to different tax and secret shelters. The share of Swiss banks in dirty money being a third of the global aggregate, some $ 45 billion out of the 136.5 billion stashed away from India would have been hoarded in these years in Swiss banks. This appears in page 30 of the report mentioned above


5)      The important point is that this is only for 5 years. More amounts were stashed away during the Nehruvian socialist regime. So the loot for 55 years would be several times the about money. In fact in those days the Indian rupee commanded a better value per Dollar. So fewer rupee could get more dollars. So the estimation that the Indian money stashed away may be of the order of $1.4 trillion.


c)      How did the money get there in the first place? (if you could elaborate a little on this, that would be great)

There are several methods /reasons. Under invoicing/over invoicing of exports and imports and getting the balance stored abroad.Kick backs from major defense/civilian contracts. Not bringing the earnings abroad. In the olden days smuggling of Gold and illegal money. Transactions done abroad and not reported here. Hawala funds. Funds earned by artists/ Entertainment industry /sports people and stashed abroad. When you want to indulge in Adharma hundred ways are open!

d)      Do you feel international terrorist organisations use the tax haven route, to send across money all over the world, to finance their nefarious activities?

Even our NSA—M.K Narayanan has spoken about it in Berlin

e)      You recently wrote, “Under pressure from federal authorities, Swiss bank UBS is closing the hidden offshore accounts of its well-heeled American clients, potentially allowing their secrets to spill into the open.”  Do you feel the government of India should also demand all the Indian black money in Swiss banks, back?

Of course. India should and must act. We are not a banana republic.

f)       How can the government go about doing the same? What are the different ways in which it can try and get this money back?

Put it on the Global Agenda. Put it in G 20 Put it in IMF Put is in EGMONT GROUP. Also take a lead among all developing countries. Support US /German/French Efforts.

g)      Do you feel Swiss authorities and other tax havens will co-operate with us on this issue, if we do take the initiative?

It is not due to our pressure but that of US which will make them co-operate. When a family is in deep financial crisis then it tries to look at the small amount saved under the sugar jar by the grandma. Same way developed economies are desperate for every dollar. Even if we do not act due to their efforts the list of crooks may be out .Then we will be in a dangerous social situation since Who’s Who of India will be there. Instead we should get it and get the funds and decide on the steps to sterilise it and punishment etc. Otherwise world will laugh at us. We will be worst than a Nigeria [Sani Abacha] or Phillipines [Markose]
h)      Do you feel the government will do this, given that a lot of black money of politicians is stored in the Swiss banks?

Public pressure will make them do it. Plus the evolving global situation against Tax Havens. The money belongs to the poor farmers and unorganised workers of India.

i)        Also Indian businessmen have a lot of their ill-gotten gains in these banks. Do you see pressure being applied by them on the government on not to get this money back?

The world situation is such that Indian Business man will want to bring it back now given the attractive returns in India. The entire PN route was conceived for that.

j)        You wrote in your column that the German foreign intelligence agency BND got names of 1400 clients of the Liechtenstein based LTG bank who were supposed to be suspected tax evaders. Of the 1400, 600 were supposed to be Germans. Do you think of the remaining there will be Indians as well? Has the Indian government approached the German government for the list?

Indian names will be there. Our Tax evaders and crooks are like Maha Vishnu present in all continents and all tax havens in the sea, on the earth, in the air. But our Government has been lukewarm in this issue. It should have despatched immediately senior officials plus the FM to get the names.

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