Estimate on blackmoney outside India (8-Feb-2012) No.2

February 8, 2012

https://www.facebook.com/mehtarahulc/posts/10150526625756922

Estimate on blackmoney outside India :

I googled a lot to get estimate on amount of black money Indians may have in Switzerland etc. I got all estimates from Rs 20,00,000 crores to Rs 400,00,000 crores. Well, pls start your excel or use your calculator.

Say I have Rs 100 crore of black money in Switzerland. I have two options --- I pay 30% or less tax and make it white and bring Rs 70 crore it in India. At interest of 9% a year, it will become Rs 117 crore in 72 months. And if I keep it in Swiss bank, they give barely 1% interest (in fact, sometimes, interest is negative) and so after 72 months years, that Rs 100 crore will be merely Rs 107 crores.

IOW, one has to be very very inexperienced in finance to keep the money in Swiss bank account for 6 years, given that plain vanilla way of pay 30% tax and keep rest in FD gives more returns.

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So money in Swiss, Mauritius etc bank is invested in some countries say India. So if this money is to be brought back into GoI account, then first it has to be withdrawn out of that country. eg Say a person has Rs 1000 crore in Mauritius bank and then he has invested in India by say buying SBI shares. Now if GoI wants that Rs 1000 crores, then first that person will need to sell away SBI shares and then only he can give the Rs 1000 crore to GoI.

So when black money is brought back to India, first it will be taken out from countries where it is invested. When it is taken out, it will cause shrinking in economy. So what will be net economic gain? It will be a fraction of total black money, not equal to black money.

IOW, if black money in Mauritius bank is Rs X crores, then when it is brought back in GoI account, then addition to Indian economy will be say 20% to 30% of Rs X crores, not entire Rs X crore.

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And in this whole debate, we are forgetting a point that it is TRIVIALLY easy to bring remove black money INSIDE India within 3-4 months. And that can bring immidiate benefits to citizens of India.