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BJP turns blind eye to black money in Swiss banks

As the information on illegitimate stash by rich Indians spills out, the common Indian is feeling betrayed as Prime Minister Modi has refused to act upon it. Demonetisation may get reinterpreted by the poor which may not favour BJP...

Krishna Jha

The spilling over of information, from a major chink in Swiss deposits about the huge illegitimate stash amounting Rs7,000 crore, has proved to be the beginning of a sharp decline in the support base for the ruling regime. The BJP-led government had got a massive mandate because it made loud claims to get back the black money from foreign lands and flow it in the bank accounts of people, but now, prime minister Narendra Modi has refused to act upon new information. His betrayal has led to a downward turn in his vote bank, decisively, as the masses are increasingly getting disillusioned.

The hidden agenda

The government, in the name of hunting for black money, took the step of currency scrapping, when it went for demonetising Rs500 and Rs1,000 notes which constituted for 86% of the currency in circulation. However, in reality, it was only a step towards whitening the black money as reports have proved. The notes of Rs500 and Rs1,000 denominations poured in from the coffers of BJP bigwigs and were converted within the stipulated five days by banks that were under their control. Yet, the amount of domestic black money does not stand anywhere compared to that stashed in foreign banks.

Black money in & out of India

  • Rs 15 lakh crore is reported to be the black money within the country, a good amount of which could be in the form of assets such as real estate and financial investments
  • Rs 65 lakh crore or more, on the other hand, is stashed in banks abroad

Merits of Swiss accounts

A mine of gold, kept under layers of secrecy, with no code words to reveal its glitter to the world, in the coffers of the Swiss banks, known for their reluctance to share details with authorities of other countries, are exactly the merits for which the people keen to stash their black earnings, opt for them. The wealth thus safely stored there costs a hefty premium for secrecy, unavailable in most other financial institutions the world-over.

The money stashed thus, however, does not remain static. Its graph keeps moving, upwards and downwards both, despite the fact that the walls protecting it remain beyond reach. In 2017, the funds stashed reportedly swelled by over 50%, the highest ever, up to CHF (Swiss franc) 1.01 billion (Rs 7,000 crore), according to the official data released by Swiss National Bank (SNB), the central banking authority of the Alpine nation.

Landmark plunge

Interestingly, sometime back, specifically in 2016, there were reports of Indian money in Swiss banks falling by 45 %, a landmark plunge, underlined as lowest ever yearly downward fall, to CHF 676 million (about Rs 4,500 crore).Never ever since 1987, when they had started publicising their data, it had taken such a steep nosedive, according to the report, though climbing new heights only within a year.

A pertinent question

The very quality of impregnability of the stashed wealth, adds a touch of uncertainty to the entire affair. The claim that all the money deposited in Swiss banks is not always black, raises another query. Why run all the way to Switzerland to deposit money when all the facilities are available within the country itself? The reply could be in the available option of secrecy despite the heavy premium.

These are the factors that lead the governments and investigative agencies all over the world to term the wealth stashed thus as ‘suspected black money’ when they refer to various tax havens including Swiss bank deposits.

Where is the black money?

Meanwhile, as the controversy rises over the Swiss Bank deposit leak. Minister without portfolio Arun Jaitley came out with a statement saying that it was not possible to conclude that ‘…Money in Swiss Banks is Black’.

Jaitley’s remark came at a time when the Modi government is facing criticism after latest data from the Swiss National Bank showed that money parked by Indians in Swiss banks rose over 50 per cent to Swiss Franc (CHF) 1.01 billion (Rs 7,000 crore) in 2017. But then if Swiss Money is ‘white’, where is ‘Black Money’?

Unkept promise

  • A promise to bring back black money stashed away in foreign banks was a key promise made by PM Modi at election rallies in the run-up to the 2014 elections. He had said, “If all the black money from the Swiss banks are brought back, every person will have Rs15 lakh in his bank account.” But the promise remained as elusive as the black money itself.
  • The funds, described by SNB as ‘liabilities’ of Swiss banks or ‘amounts due to’ their clients, are the official figures disclosed by the Swiss authorities and do not indicate to the quantum of the much-debated alleged black money held by Indians there.
  • SNB’s official figures also do not include the money that Indian NRIs or others might have in Swiss banks in the names of entities from different countries. It is also true that Swiss banks are not the only tax havens; there are others like in Singapore, Mauritius and Hong Kong.

Tax havens are still a favoured option

In fact, there have been leaks through the international media on tax evaders. But, as far as taking steps within the country in locating and acting on black money, very little has been done. There were the Panama Papers, the HSBC list of tax evaders and the more recent Paradise papers. On all of these dark truths, there is a studied silence. Tax evaders in the country continue to rely on tax havens as a better option and Modi government is aware of it.

India’s place in the world on Black money

  • 73rd place is India’s in terms of money parked by its citizens and companies with Swiss banks in 2017
  • 44% plunge in such funds was witnessed during 2016 when India had slipped to 88th position
  • 75th position was India’s in 2015 and at 61st in the year before, though it used to be among top-50 countries till 2007
  • 21% dip has been seen in funds parked by Pakistan nationals in 2017 and yet the country is one place higher than India at 72nd position
  • 403 billion In terms of individual countries, the UK continued to account for the largest chunk at about CHF 403 billion (over 27%) of the total foreign money with Swiss banks
  • 166 billion The US remains on the second position despite a dip of about 6 per cent in such funds to CHF 166 billion (11 per cent share of all foreign funds)
  • 20th place: Among BRICS countries, India remains to rank the lowest as China is at 20th place, Russia at 23rd, Brazil at 61st and South Africa at 67th

In terms of percentage increase, India’s 50 per cent rise was 23rd highest. The maximum increase of as much as 4,000 per cent was seen by Solomon Islands, followed by over 2,200 per cent for Faroe Islands and 1,200 per cent for British Indian Ocean Territory. The increase was more than 100 per cent for Maldives, Grenada, Turkmenistan, Laos, Lesotho, Qatar, Bonaire, Sint Eustatius and Saba.


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