Financial Transparency Coalition

United Press International published a great piece today from their Asia bureau about India’s struggle with black money. From the article:

Taking advantage of the Paris-based Organization for Economic Cooperation and Development’s sanction threats against tax havens, the Indian government is taking a hard look at the country’s plethora of Double Taxation Avoidance Agreements. But laying a hand on the enormous amount of the country’s illegal or black money stashed abroad may be easier said than done.

The topic of illicit financial flows out of India has become a big issue in recent years, but it reached new heights this spring as the BJP made retrieving the black money from Switzerland a central part of its campaign platform in the parliamentary elections.

However, while the election came to an end in May with the reelection of the Congress Party to power, the outrage surrounding illict financial flows from India has not died down.  The article, titled “India tries to tame tax havens,” features statistics from Task Force Member Global Financial Integrity’s (GFI) latest report on illicit financial flows as well as quotes from GFI director Raymond Baker and GFI Lead Economist Dev Kar:

According to GFI, which is the first international organization to seriously study the flow of black money, or what it calls illicit money, from 2002 to 2006 India witnessed average illicit financial outflows from a low of US$22.7 billion to a high of US$27.3 billion per year.

GFI ranked India fifth in the list of 160 developing countries suffering from the outflow of illicit money. In its report Illicit Financial Flows from Developing Countries, 2002-2006, GFI estimated that over 1 trillion dollars of illicit money moves out in a year across borders, with Asia accounting for 50 percent of that outflow. China with US$233-289 billion topped the list, followed by Saudi Arabia (US$54-55 billion), Mexico (US$41-46 billion) and Russia (US$32-38 billion).

Indeed, GFI’s report was referrenced often during the Indian elections, as GFI is the first and only international organization to measure the flows of illicit money. Mr. Baker insightfully points out that while much of India’s focus has heretofore been on the recovery of the illicit funds that have already left the country, and while GFI’s numbers demonstrate that massive quantities of Indian money are already stashed abroad, the more pressing issue “is to curtail the ongoing outflow of money from India.”

Trying to recover the funds before India addresses the massive flows still leaving the country, would be akin to a person trying to dry off before they’ve gotten out of the shower; it doesn’t make much sense – you’d still be wet.