Economic
Highlights
New Delhi, 2 May 2014
‘Black’ Money
Menace
FRAUD BY
PUBLIC BANKS MORE
By Shivaji
Sarkar
Money
stashed in Swiss banks is back in news. The Supreme Court wants the names of 26
Indians revealed. But the exact amount of money they have is not known.
However, the income-tax authorities seem to know. It has demanded tax of Rs 40
crore only. If that is so, then the amount is really not that large and much
fuss is being made out of it. Normally one-third of the income is claimed as
tax. By that token the total money would not be more Rs 120 crore with the depositors
of LGT Bank, Liechtenstein and
about those whose information is provided by Germany.
But more
than this, Indians need to be wary of the high public sector bank losses (NPAs)
of Rs 2,29,007 crore and Government’s
move to make these losses by recapitalising to the tune of Rs 54,200 crore
during the past three years. It is a bigger and worse scam, which nobody
discusses. The money touted to be in foreign banks is a fraction of the total
NPAs.
Switzerland has once again refused to share
information about the deposits there as its Ambassador to India, Linus von Castelmur, says that data with India was
robbed by a European country and as per Swiss law stolen data could not be used
to obtain information! But how much money HSBC would have? There are many
guesses but no firm information has yet been revealed.
Some reports claim a total
exceeding $1.4 trillion are stashed in Switzerland. Other reports,
including those reported by Swiss Bankers Association and the Government of
Switzerland, claim that these reports are false and fabricated. The total
amount held in all Swiss banks by citizens of India is about $2 billion.
In February 2012, the Central
Bureau of Investigation director said that Indians have $500 billion of illegal
funds in foreign tax havens. In March 2012,
the government clarified in Parliament that the CBI director's statement on
$500 billion (Rs 30,000 crore) of illegal money was an estimate based on a
statement made to Supreme Court in July 2011.
In 2011, India got the
names of 782 Indians who had accounts with HSBC. But the government did not
disclose the names. According to a White Paper on Black Money in India, May
2012, Swiss National Bank estimates that the total amount of deposits in all
Swiss banks, at the end of 2010, by citizens of India were (Swiss franc) CHF
1.95 billion (Rs 9,300 crore or $ 2.1 billion). This amount is about 700 fold
less than the alleged $1.4 trillion in some media reports.
Why is this brouhaha? It is
being propagated that if all the money stashed abroad is repatriated it would
usher in a golden era. If the figures given by the government are correct then
it would be only 25 per cent of a year’s NREGA allocation.
If this is what the apex court
is trying to probe, it would end up paying a hefty sum on investigations. It
might become another Bofors where the investigating agencies spent more money
than the total bribe alleged to have been paid.
It also rakes up another
question. Why people should stash away their money abroad. It points to a
problem with our tax system, which has specialised in harassment and extorting
the maximum. Just imagine if one earns Rs 120 and Rs 40 is charged as income
tax can the poor man pay that? True crores and hundreds are not easy to compare
but the plight at both the levels are almost same. It is also alleged that most
of this money belongs to large corporate. May be, but does it justify depriving
them of their hard earned income.
The State needs taxes. This is
a reality. It also needs to economise on its unnecessary expenses. It is in a
vortex. Corrupt elements raise prices. It leads to higher wages in organised
sector. It increases money supply. The cycle of inflation continues. The
government gets into deficit. It calls for a review how prices could be
controlled and how wage raise should be checked to reduce disparity.
It raises a moot question. Is
black money really an issue? By the definition of the tax authorities virtually
all cash transactions are “black”. They forget that trading in cash gives the
robust strength to the economy. In such transactions, by traders in different
sectors, default is the minimum. Turnovers take place at small fees or
commissions. It keeps the economy lubricated.
But the tax authorities want
everything to be transacted through the banking system. In fact, the
functioning of many banks is suspect. The banking system takes unethical cuts
on the pretext of a cheque having “bounced”. They collect the money next day
but the customer is made to suffer.
Additionally, the transactions in banks are possibly
no longer safe. The banking losses called NPAs as noted are increasing. As on
March 31, 2013, net NPAs of 40 listed banks were Rs 93,109 crore, which rose to
Rs 1,28,533 crore as on September 30, 2013. Gross NPAs (total losses over the
years) as on September 30, 2013 stood at Rs 2,29,007 crore, 27 per cent higher
when compared to Rs 1,79,891 crore as of March 31, 2013 for these 40 listed
banks.
The growth rate of net NPAs at
38 per cent has been significantly higher than the 27 per cent growth rate for
gross NPAs. This needs special attention. It is a simple way to defalcate
public money. The banking system is getting weaker. The government quietly recapitalised
the public sector banks by Rs 54,200 crore in three years. In other words,
people are having a double whammy. Their deposits are at risk and taxes they
pay are being utilised to keep the banks afloat.
The new government has to
probe why the banks are at losses and who have actually benefitted. Certainly,
it is a greater risk than the “unaccounted” foreign deposits. In simple terms
more money is being swindled away than the deposits banks are getting. ----INFA
(Copyright, India News and Feature Alliance)
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