(Much of the draft to bring Black Money Back was written not by me, but some other Recallist friend of mine.)
What is black rupees/dollars and black wealth? What is black rupees or black wealth inside India? And what is black dollars or black wealth outside India? And what Gazette Notifications can reduce black rupees and black wealth in India? And what Gazette Notifications can bring back black dollars?
Answering all these questions in full detail will take 200-400 pages, and I will publish them in few months. In this chapter, I will confine to brief explanations and proposed Gazette Notification drafts to reduce black rupees and its role in India and proposed Gazette Notification drafts to bring black dollars hoarded in Switzerland, Kayman Islands, Mauritius etc. back in India.
The black money (wealth) means wealth that one has obtained using income on which he evaded taxes or income was obtained illegally via corruption\crime or both. To explain three very different categories, I would give following examples :
1. A businessman makes say Rs 1 crore of profit and doesn’t pay tax. Then that Rs 1 cr is black money. Say he pays that Rs 1 crore to a land-owner, and show the land transfer as inheritance. Then that land is now black wealth. Please note that the activity he did to generate Rs 1 crore was legal and ethical. The only illegal and unethical part was his evading taxes. The problem here collecting proofs and convincing Jurors that he did earn Rs 1 crores not pay taxes and that inheritance was a sham.
2. Consider a Minister or an IAS or a judge who takes bribe of Rs 1 crore for some favors. Then entire Rs 1 crore is black wealth whether he pays taxes or not. Again, problem of convincing Jury that bribes were paid is needed.
3. Say a criminal earns Rs 1 crore using crimes like narcotics or extortion. Then entire Rs 1 crore is black wealth whether he pays taxes or not. Again, officials need to convince the Jurors that the accused committed crime, and had obtained Rs 1 crore from that crime, and didn’t pay taxes.
In case of (2) and (3), the fines and punishment will be and should be higher than in (1). And unless Jury or citizens agree that income was obtained by corruption or crime, the Jury and citizens may chose to give benefit of doubt and assume that income was obtained by fair business. In any case, in the first part, the Govt lawyer has to prove to Jurors a person has more wealth and/or incomes than incomes he officially disclosed and paid taxes. And simultaneously, same or different Govt lawyer can try to prove to Jurors that that person did crime or corruption. The outcomes of two cases will decide the total fines and prison sentences. In most cases, if the Govt lawyer can only prove tax evasion, the Jurors will impose less fines and no prison sentence. And in latter cases, Jurors will impose severe fines and there will almost certainly prison sentence.
The black money outside India is when person converts his black rupee earned in India into dollars and deposits it in banks outside India. How is Indian rupees converted into dollars? Some of the ways are
1. Legal way is to give rupees to RBI and RBI will give dollars to that person
2. A common way is to import over-invoiced goods. Say company-X needs equipment which costs Rs 1 crore or say $ 200,000. He will ask company to send invoice of Rs 1.5 crore i.e. $300,000. So RBI will give him $300,000 of which the selling company will deposit $100,000 in the swiss bank account of the owner.
3. Selling of lands : say a company in US wants to buy land worth Rs 100 crore . He can give Rs 20 crore to its Indian owner in white and give Rs 80 crore to him in his Swiss bank account. IOW, when some foreign company wants to but land, money gets transferred in Swiss account
4. Corruption : Say a Minister, officer or a judge wants to do favor to MNCs for bribe. The MNC can deposit the bribe money in foreign bank.
Please note that “black money” shouldn’t simply mean money that is hidden in cash or gold form. It can be land as well, and in fact, much of the black money is in form of land. The land may be owned in the name of person or his relative or his company or his trust. The Charitable Trusts are the most notorious means to hide black land.
Land is the MOST popular and used way to store black wealth. One can obtain land by paying 60% to 80% cash and only rest in white. And in some cases, like inheritance, some pay 100% cash. Eg say a farmer dies and he has 3-4 sons who have decided to sell away the land and split the cash. Then many times, an IAS, IPS, judge or Minister will come, pay them the cash, and ask them to write document saying that dead person gave the land away as inheritance to that IAS, IPS, Minister or judge !! Since MPs in India abolished inheritance, the black wealth not only got hoarded, it became white without even 1% of loss. In Spain, inheritance to non-relative get taxed at rate of 70% and so the person will lose 70% of his black wealth if he takes this route. I have proposed Gazette Notification drafts which can reduce use of land to store the black wealth
Further note that all cash is not black money. Eg say a person gets salary of Rs 100k, pays tax and deposits the rest in bank, and then withdraws cash. This cash is very much white money and not black. And likewise, if a person gets cheque of say Rs 10 crore, deposits it and doesn’t pay tax. Then this bank-money is black money. As a general rule, if money is in Indian bank, very few will dare not to pay tax on it. So much of the money in bank is white money. And of all cash, some half would be white and half will be black. As of Nov-2011, (see page-4 of http://rbidocs.rbi.org.in/rdocs/Wss/PDFs/WSS021211F.pdf ) the total cash rupees plus bank rupee in India is Rs 70 lakh crore and cash notes are Rs 9 lakh crore. The corrupt RBI Governor never gives information on per capita basis. On per capita basis, taking population of India as 121 crores, this means bank rupees plus cash rupees are Rs 57800 and cash rupees are Rs 7400 per person. Now not all cash is black. Say half the cash is black. Say 50% is white. Then total black rupees are Rs 3700 per Indian citizen i.e. only about 6% . IOW, cash notes is indeed used to store black wealth, but not much.
Gold is popular medium to store black wealth, but there is no way to estimate. Estimates with no legally valid data says that India has 18000 tonnes of gold as on Nov-2011, which means 15 grams per person which is Rs 45,000 per person (as per Nov-2011 price of Rs 3000 per gram). Now all gold is not black gold, as many people have purchased it from their income after paying taxes. However, India is not gold-rich anymore by world standard. As per estimates, India has only 12% of world’s gold supply and India has some 17% of world population. So India is below average when it comes to owning gold. Silver is another popular medium, followed by diamond, followed by paintings etc. and so forth. Further, a person may keep wealth such as land, gold etc. in the name of relative or company or charitable trust.
In India, black wealth can be stored in land, cash of gold outside India. And in same way, black wealth can be stored in land, gold or cash outside India. But there is difference --- in India, one cant store black wealth in bank as bank will report to Income Tax dept. Same way, an Indian citizen cant store black wealth in country such as US, UK, France, Germany etc. as these countries may report back statement to Income Tax dept in India. But there are some countries such as Mauritius, Switzerland, Cayman Island etc. which do not report statements of their clients to any Government. These are known as Underground Banks, and such banks promote international black economy.
The person may manage to keep money in his name or in the name of relatives or companies or charitable trusts. That makes it difficult get the information under existing laws.
We already have a law-draft that makes black wealth outside India as National property. How? Because if a person had not disclosed the income he had in past 6 years and not paid taxes on it, then taxes due plus interest plus penalty will exceed the entire income. The wealth he had accumulated before 6 years becomes untouchable though. The law-draft can be amended to ask a person to disclose all his assets outside and inside India, and impose a fine on undeclared assets above some limit. That is discussed later.
Following laws can reduce black money inside India
1. Buy-out with premium : Whenever buyer-seller sell land (or second flat), the actual white price will be disclosed on Govt website. And of within 15 days, if a third party gives 25% extra to Govt, then the Govt will give 20% extra to buyer and hand-over the land to the third party. See section-25.9 for more details. (see chap-25 on taxation for details)
2. Wealth tax of 1% of market value above 25sqm per person of land : The wealth tax will reduce hoarding of land and will reduce the opportunity to hoard black wealth in land. (see chap-25 on taxation for details)
3. Canceling large notes : Reduce notes of Rs 1000 and Rs 500 and finally cancel them. This will not have very significant impact, as people can always hoard gold instead of notes. But canceling large notes will reduce fake notes problems.
4. Publishing ownership of all plots and plot-owners to individual level : All plots’ owners will be listed on internet and ownership of all trusts/companies which own land will be also published on the net. This way, no person will be able to hide lands he owns.
5. Reporting tax-id of receiver : The business which is claiming an expense as deductible must report tax-id of receiver and so that income tax dept can ensure that receiver has shiwn it as expense
A detailed description of buy-out and wealth tax is given is chap-25.
This is not an easy task, as we have to force foreign Governments to change their banking laws. This can be done by moving resolution in UNO and also gathering support of all other countries in the world. If Ministers/officers apply their full weight in UNO and convincing other countries, then it is possible to get a resolution passed in UNO which will force all countries to change their banking laws. Now the foreign Govts and bankers may try to bribe out the officers\Ministers in-charge of bringing black money back. To ensure that our Ministers\officers do not sell out, we citizens must have mechanism which will enable us to expel\punish them moment they sell out or we suspect them of sell out or we see gross inefficiency in them. IOW, if we don’t have Right to Recall PM, other Ministers and key officials, chances are high that these officials will sell out. To be more direct, I would say that if new regime doesn’t have RTR, the officers/Ministers of that regime will sell out the very moment they come into power and will do nothing to bring black money back.
So following are the drafts I propose to bring black money back
1. BBMB.01 - TCP : pls see section-1.2
2. BBMB.02 - right to recall PM : see section-6.6
3. BBMB.03 - right to recall Minister of Foreign Affairs : a draft similar to RTR-RBIG draft (RTR-RBIG draft = right to recall Reserve Bank Governor draft given in section-9.3) . This draft will ensure that Foreign Minister works promptly to get a resolution in UN passed that would force Switzerland, Mauritius etc. to change banking laws.
4. BBMB.04 - right to recall Indian Ambassador to UN : a draft similar to RTR-RBIG. This will ensure that Indian Ambassador to UN works promptly to get a resolution in UN passed that would force Switzerland, Mauritius etc. to change the banking laws.
5. BBMB.05 - right to recall Director of Enforcement Directorate : a draft similar to RTR-RBIG All foreign wealth related violations are handled by so called Enforcement Directorate, a unit under Finance Minister. The right to recall over this officer is must to ensure that he gathers information and prosecutes them.
6. BBMB.06 – Jury System inside Enforcement Directorate : a draft similar to Jury System draft given in section-21.11. The JurySys inside Enforcement Directorate is must to create a nexus less environment to prosecute those accused of having black money in Switzerland etc..
7. BBMB.07 – Narco Test in public via Majority Approval : see section-27.4 . Using this draft, citizens can take Narco tests of very wealthy and politically senior and powerful persons.
8. BBMB.08 – Polygraph and Brain Mapping by Jurors’ Approval. Using this draft, Jurors an take Narco polygraph and Brain Mapping tests of those against whom there are some evidences of having black wealth.
9. BBMB.09 – Asking all citizens to willingly disclose wealth abroad, and allowing them to keep 50% of the wealth they have acquired from legitimate business after they give 50% to Govt, of which Govt will divide half of that 50% i.e. 25% equally amongst all citizens. If the wealth is obtained by crimes or corruption, then entire 100% will be confiscate
10.BBMB.10 – Freezing all foreign investments till owners’ names are disclosed – The Govt of India can freeze all foreign investment till the name of the owners of the investment are disclosed.
11.BBMB.11 – Resolution in UNO asking each country to disclose names of trustees of all trusts in that country and disclose names of owners of all the companies registered in that country.
12.BBMB.12 – Resolution in UNO asking each country to ask its banks to disclose names (not amounts) of Indian Nationals or Persons with Indian Origin who have account in that bank. And also disclose the names of trusts and companies, who have trustees or director or owner who is Indian National. And disclose the bank statements of accounts on the specific requests.
13.BBMB.13 – Print a draft in Gazette that if any person wish to willingly give a narco-test in public, then Narco Test Officer will take his narco-test in public. The questions will be asked by Jury and may also contain questions given by the person himself as well. And from the information obtained from the narco-test, if black dollars or black rupees or black wealth is obtained after proofs, then that person will get 20% of the final amount obtained by the government. If information was obtained from more than one person, then Jury will decide the distribution, and the Jurors will see that person who gave information first and person who gave most important pieces get higher shares. This law can be used by staff of person who has black money or agents who provided help in hoarding black wealth etc.. The details are explained in section-41.10
The drafts BBMB.01 to BBMB.12 can be brought by PM by merely printing them in Gazette in one day and within 30 days all of them can be fully implemented. This will reduce black money’s role inside India to less than 10% of what it is now. The drafts BBMB.11 and BBMB.12 is something that Foreign Affairs Minister and India’s Ambassador to UN need to work to get them passed in UN. For this, they will need to run a campaign in all countries which are adversely effected by Swiss banks. This will be a long process --- can take a year or so.
Using Narco Tests in Public with Majority Approval, the citizens can conduct Narco Tests of power politicians etc. who are suspected of huge corruption. During Narco Tests, they will give out names of many other Ministers, MPs, judges, IAS and businessman who have accounts. Based on these names, the majority The Narco Tests should not be used as final proofs, but only as unnamed leads and information. From the names and details of the accounts, Govt of India can ask the bank to provide the bank statements of those individuals or their trusts or their companies. And after that, the individuals can be forced to bring that black money back to India or Govt of India can ask the foreign bank to hand over that money.
When BBMB.11 and BBMB.12 pass in UNI, the information of those who have accounts in Swiss etc. banks will become readily available and using this information, getting black money will become easier.
BBMB.13 will motivate staff of corrupt Ministers, IAS or middlemen or staff of middlemen etc. to give reliable information and obtain black money. Eg say a staff of a Minister or an IAS or a judge has information on where he has hidden his black wealth. Then he can provide that information using narco-test on himself and thus enable Govt officers to unearth that black wealth. If he does that, he will get 20% of the amount Govt gets. The narco-test is kept so that Govt officials do not end up wasting time in spurious information.
As per the drafts I have proposed, if a person has black money in foreign country, then
1. If the Jury rules that the money was obtained by legitimate business, not via corruption or crimes, then the owner can keep 50% of it, 25% will go towards Military and remaining 25% will be divided amongst citizens.
2. If the Jury rules that the money was obtained by corruption or crime, then the owner will get nothing, and the 50% will go towards Military and remaining 50% will be divided amongst citizens. The owner may face a prison sentence of up to 15 years as decided by the Jurors.
If there is no RTR over PM, Foreign Ministers and key officials, then first thing they will do is to open their own accounts in Swiss banks. Or, they will work under foreign influence or influence of elitemen. So Right to Recall over key posts is must. In absence of RTR, dream of getting black money back and using them for good of India is pretty much a pipe dream.
Please send order to PM and Loksabha Speaker via SMS that your Yes\No sent via SMS on any bill presented in the Parliament should be posted on the website of Parliament. Please also see chap-13 of this book http://rahulmehta.com/301.htm . It has several steps where-in you can spend 6 hours a week and help to bring TCP draft in Gazette in India. The steps involve distributing pamphlets, informing citizens on motives of leaders such Congress MPs, BJP MPs, The Anna, Arvind Gandhi etc. who oppose TCP draft, by giving newspaper ads, contesting elections. Once TCP gets printed in Gazette, using TCP, it will become easy for activists to get citizens’ opinion law-drafts mentioned in this chapter on such as Right to Recall Finance Minister, RTR-PM, Wealth Tax, Competitive Buy Outs etc.. This will make it possible to bring black dollars back from Mauritius etc. and also reduce black rupees in India.