This isn’t quite how Piyush Goyal has put the point but it is what he means – of course not all Indian source money in Swiss banks is there in order to dodge taxes. For the Indian situation is rather like the British one, not exactly, but close enough for this point. It’s entirely possible to be an Indian national – and thus have your account recorded as being Indian – without actually owing tax in India. Equally, there’s nothing which says you cannot have a Swiss account as long as you pay tax upon the income from it.
That is, there are entirely and wholly legal reasons for having a Swiss account with money in it. Meaning that not all Swiss accounts can be seen as being evidence of illegality.
Finance Minister Piyush Goyal said on Friday that the reported 50% rise in deposits by Indians in Swiss banks could not be presumed to be a case of black money parked abroad. He added that the government would start getting details on bank accounts of Indians in Switzerland from next year under a bilateral tax treaty, and strong action would be instituted against anyone found guilty.
We’re in an interim stage here, where we get to find out the totals by nationality from the Swiss banks, but the government isn’t getting detailed information on exactly who owns the account for tax purposes. But, you know, that’s fine, this is indeed that interim:
Arun Jaitley hit back at the Congress for assuming that a spike in Swiss Bank deposits by Indians was due to black money, asserting that those who participate in a public discourse must understand “basic facts”.
“To assume that all the deposits are per se tax evaded money or that Switzerland in the matter of illegal deposits is what it was decades ago, is to start on a shaky presumption,” the former finance minister said in a blog.
Our two points being as follows. Firstly, it’s entirely possible to earn money outside India and then place it in a Swiss bank account. As long as whatever Indian taxes are due are paid there’s nothing wrong with this at all in fact.
Funds stashed, by Indian moneybags, behind the ‘impregnable’ walls of Swiss banks swelled by over 50 percent to CHF (Swiss franc) 1.01 billion (Rs 7,000 crore) in 2017, the PTI reported citing official annual data released by the Swiss National Bank (SNB), the central banking authority of the Alpine nation.
It’s also true that there’s nothing at all which insists that an Indian national owes Indian taxes. Tax is based upon residency. The bank data here is based upon nationality, which isn’t that same residency base used in taxation.
We’ve seen this all before with the UK:
The reason their numbers were entirely wrong is due to a quirk of the UK tax system. If you are UK resident then you pay UK tax on your income in the UK. This is from whatever work you do there but also includes any money you might earn abroad and then bring into the UK. If you are UK domiciled (broadly, but not exactly, someone born in the UK and continuing to live there) then you pay UK tax on your entire worldwide income. As you can see this leaves a gap. People who are UK residents but who are not domiciled there do not have to pay UK tax on their foreign earnings: as long as they leave them in those foreign lands.
When the Swiss went to look at all those accounts held by British nationals they found that instead of there being vast numbers of tax evaders there were in fact vast numbers of resident but non-domiciled and non-UK resident British nationals with accounts. Neither of whom owe any UK tax on the money that they’ve quite legally put into a Swiss bank account. Please do note that this isn’t a flaw or a loophole. This is how the system works: it’s only Americans (and Eritreans) who have to pay home country taxes wherever they live in the world.
There’s really nothing very surprising about this. The mistake is in the assumption that all offshore money must be tax dodging. As far as anyone can see – you know, real evidence – this isn’t even true of a majority of it. The claims of how much tax is being dodged are therefore highly overblown.
When I was living in Hong Kong I was “stashing away” all my spare money in the Isle of Man – *spare* money, as in that money left over after paying my Hong Kong taxes and costs of staying alive, and sending it to Man in order to pay my mortgage and other bills in the UK via the UKBACS system.
Oh Noes! I was hiding my money in the UK! Report them to the TRUCkers!
The term “black money” (like “assault weapon”) is consciously designed to prevent thinking about any of the above. The Modi government (with its Aadhaar biometric identification system) has embraced having the government know everything about the individual, and probably sending him a statement at the end of the month informing him how much he has left to spend. This has led to the nullification of all the currency, in exchange for new currency for those citizens who got the word in time and were able to spend a day standing in a long line. This was done to eliminate “black… Read more »