We talked about grey (or black) economy on Saturday, and also about how one can evade taxes by setting money aside in Swiss banks. There is not better example of this than then number of Indians doing this. Every major transaction in India has to involve “under the table” exchange, and most of the dealings are done in cash (to avoid taxes). Indian GDP is about 4.5 trillion, but by one estimate if all of this cash transactions are counted, the GDP of India will be twice its value. For a country of 1 billion, where infrastructure is at the minimum, losing about $1 trillion in taxes every year due to the black money transactions is crippling.
But the starkest difference was seen when it was known that Indians have about $2 trillions parked in Swiss havens alone ! Getting this money is not easy, even forcing the Swiss authorities to release the names of the bank account holders has been extremely difficult, and shows the kind of difficulties we have when dealing with problems across borders. The new government in power has vowed to bring the money back, and it will be seen how much of that will actually happen.
At one point it was said that 40% of the worlds poor lived in India. But these revelations just show us that its a poor country made up of rich people.
Article: http://www.bloomberg.com/news/2014-06-08/hidden-assets-seen-worth-2-trillion-targeted-by-india.html
– Amey Bordikar
Thank you Amey for sharing this interesting article with the class and for your excellent commentary on it.
differences in tax systems around the world, which are the root cause of tax evasion, in India and elsewhere, are another area where the country differences that are at the core of our course express themselves. A vivid illustration of a global world separated by countries.
and as I am sure you know, tax evasion is a very big problem in the US as well.
the discussion we had in our last class about the solution to legal differences – harmonization of laws – and the challenge of this solution, holds also in relation to harmonization of taxes.