India, one of fastest growing economies in the world, is also a leading source of illicit financial outflows, pegged at $51 billion a year, or a-fourth more than its defence budget, according to Washington-based research and advocacy firm Global Financial Integrity (GFI).
With $51 billion siphoned out a year, India ranks fourth in terms of black money outflow, just behind China, Russia and Mexico. Over half a trillion ($510 billion) worth of black money has been drained out of the country from 2004 to 2013, said the US based think tank in its new study.
This report comes when Prime Minister Narendra Modi, whose key poll promise was to bring back black money stashed abroad, is seeking international cooperation towards that end, and the government has since worked with authorities abroad to crack down on illegal account holders, enacting tough laws to arrest such practices.
China tops the list with $139.2 billion average outflow of illicit finances per annum, followed by Russia at $104.9 billion per annum and Mexico at $52.8 billion per annum, according to the study.
The study titled “Illicit Financial Flows from Developing Countries: 2004-2013” reveals that illicit financial flows first surpassed $1 trillion in 2011, and have now grown to US $1.1 trillion in 2013, marking a dramatic increase from 2004, when illicit outflows totalled just $465.3 billion.
The illegal capital outflows stems from tax evasion, crime, corruption and other illicit activity, said the study adding that illicit financial flows averaged a staggering four per cent of the developing world’s GDP.
In October, the Indian government said that 638 number of declarations have been received under the compliance window declaring undisclosed foreign assets amounting to Rs 3,770 crore under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (the Act).
The compliance window was opened from July 1, 2015 to September 30, 2015. Tax at the rate of 30 percent and penalty at the rate of 30 percent is to be paid by December 31, 2015, according to the government statement.
“This study clearly demonstrates that illicit financial flows are the most damaging economic problem faced by the world’s developing and emerging economies,” said GFI President Raymond Baker, an authority on financial crime. “This year at the UN the mantra of ‘trillions not billions’ was continuously used to indicate the amount of funds needed to reach the sustainable development goals. Significantly curtailing illicit flow is central to that effort,” he added.
Calling on the IMF to conduct the annual assessment, the study said the international community has not yet agreed on sustainable development goals, which calls on countries to reduce illicit financial flow by 2030.
