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  1. Editorial: Trading black money

Editorial: Trading black money

Fix the trade database, check money flowing out

By: | Published: December 15, 2015 12:49 AM

The fact that the government got a mere Rs 3,770 crore worth of declarations for black money held overseas when it opened a one-time compliance window in October seemed to suggest estimates of money stashed away in Swiss vaults was vastly exaggerated—more so since the talk of black money flowing out of India has been accompanied, over the decades, with talk of it coming back into the country through the participatory note (PN) route. At the same time, assuming there is something to the Global Financial Integrity (GFI) numbers used by the BJP’s top brass to estimate Indians have $462 billion stashed overseas, some perspective is required. For one, at $83 billion, the number given for illegal forex outflows for 2013—mostly through under-invoicing exports and over-invoicing imports—represents just 4.4% of India’s GDP. More important, with the amount being siphoned out rising 4.3 times between 2004 and 2013, this underscores the importance of focusing on money being siphoned out right now as opposed to worrying about the past—as both GDP and trade rise, the amount allegedly being siphoned out also rises dramatically.

That is why it is important that customs officials have a robust database to compare the value of both exports and imports on a 24×7 basis, and such databases are easily available globally. The Indian Customs Valuation Database Project was initiated to develop a real-time, electronic database in respect of goods imported at all customs stations in India. “The idea is to provide instant access to the combined data, duly analysed and flagged by the Directorate of Valuation (DoV), to all assessing officers for their use as an effective tool to check under-valuation and valuation fraud so as to safeguard customs revenue,” the Central Board of Excise and Customs has outlined as the objective of the database, but as pointed out by the Tax Administration Reforms Commission (TARC) in its report, data management and sharing has been a major problem in the revenue department. While there is a need to create a unified and robust data collection, dissemination and sharing within the revenue department, as suggested by the TARC, utilisation of various global platforms and organisations providing important trade pricing data through this window is critical for this exercise. Trade data exchange windows in the East African Community, European nations and also trade facilitation agreements, have succeeded in curtailing loss of substantial customs revenue on account of trade mis-invoicing, and there is no reason why India can’t do the same to curb illicit outflows and raise customs revenue that can be utilised for development.

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Tags: Black Money

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