India’s offshore tax amnesty recovers just $575 million

New Delhi, October 1

India recovered a meagre $575 million of unreported funds under a tax amnesty scheme that offered a chance to citizens to disclose overseas assets by paying tax and a penalty, raising doubts over a campaign against tax offenders.

Only 638 people declared assets under the tax amnesty that closed on Tuesday. Tax

authorities had expected many more disclosures.

During his election campaign in early 2014, Prime Minister Narendra Modi had promised to recover billions of dollars from tax evaders who have stashed funds in overseas tax havens.

Under the Black Money Act, enacted by parliament last year, tax evaders would face up to 10 years in prison and a penalty if found with foreign assets.

Illicit funds are often hidden abroad to avoid payment of about 30 per cent income tax.“It is disappointing and many people have missed the opportunity to come clean,” said Rakesh Nangia, managing partner, Nangia & Co, a tax consultancy firm.

While there is no official estimate of the amount of money illegally deposited abroad, the Washington-based think-tank Global Financial Integrity has estimated India suffered $344 billion in illicit fund outflows between 2002 and 2011.

India has worked with countries, including Switzerland, to obtain information about its citizens who it believes may be hiding unaccounted money in offshore financial centres.Switzerland has shown willingness to help, the government says.

Globally, many countries have launched amnesty schemes.Under a scheme effective since 2009, US tax authorities have recovered about $6.5 billion in taxes, interest and penalties from more than 45,000 tax-payers.

An Italian tax amnesty lured more than 80 billion euros ($89.18 billion) back into the country.

“The amount recovered is just about 0.03 per cent of the total GDP,” said NR Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a government-funded think tank.

“Either our estimations about black money were wrong or we have not fully recovered the money.”