$1 trillion black money hunt earns just enough to buy ice cream

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$1 trillion black money hunt earns just enough to buy ice cream

New Delhi - India brought in about Rs25 billion ($385 million) from a three-month window that ended last month before penalties increase on funds stashed abroad to avoid tax, known locally as black money.

By Bloomberg

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Published: Sun 18 Oct 2015, 12:00 AM

Last updated: Sun 18 Oct 2015, 2:05 PM

After saying India had enough illegal funds overseas to buy everyone a new car, Prime Minister Narendra Modi has so far only recovered enough to get them a scoop of ice cream.
India brought in about Rs25 billion ($385 million) from a three-month window that ended last month before penalties increase on funds stashed abroad to avoid tax, known locally as black money.

That amounts to Rs20 for every Indian, still far short of the Rs2 million per person that Modi said was possible while campaigning last year.
What's more, tax experts say that Modi isn't likely to bring in much more under the legislation designed to recover as much as $1 trillion estimated to have been sent abroad over the past five decades. India has long struggled to bring in enough revenue, leaving it with one of the widest budget deficits among the largest emerging markets.

"This is just more groping in the dark," said Anil Harish, a partner at law firm DM Harish & Co. in Mumbai, who has some clients under investigation for concealing funds overseas. "What they have to do is create a friendlier environment for those people who actually want to bring back their money, while doing a better job of broadening their existing tax net to prohibit people from illegally sending their funds overseas in the first place."

Clamping down on black money has long been a hot topic in India. Modi and members of his ruling Bharatiya Janata Party have accused the Gandhi family dynasty, which has ruled India for most of its history, of holding black money in Swiss bank accounts. The Gandhis deny the allegations.
"If we bring back those rupees then each and every poor man in India will get 1.5 million to Rs2 million for free," Modi said at a rally in January 2014, before he won India's largest lower-house majority in 30 years. A year later, Amit Shah, president of Modi's ruling party, said the remark shouldn't be taken literally. The amount raised from July to September is equivalent to 0.2 per cent of India's total revenue last year.
The total amount recovered was about four times less than another tax amnesty program in 1997. One reason Modi's approach hasn't brought in even more revenue was because he approached the problem politically with harsher penalties for hiding assets overseas, said Sudhir Kapadia, National Tax Leader at Ernst & Young in Mumbai. Instead, his priority should be on getting Indian agencies to better enforce existing laws, Kapadia said.
 

An Indian forex dealer counts INR 1000 currency notes in Mumbai on August 25, 2015. The Indian rupee recovered by 26 paise to reach 66.39 against the dollar on the Interbank Foreign Exchange in early trade. Dealers said fresh selling of the US currency by exporters and banks, the weakening of the dollar overseas and gains across stock markets supported the domestic currency.  AFP PHOTO/ INDRANIL MUKHERJEE
An Indian forex dealer counts INR 1000 currency notes in Mumbai on August 25, 2015. The Indian rupee recovered by 26 paise to reach 66.39 against the dollar on the Interbank Foreign Exchange in early trade. Dealers said fresh selling of the US currency by exporters and banks, the weakening of the dollar overseas and gains across stock markets supported the domestic currency. AFP PHOTO/ INDRANIL MUKHERJEE


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