Not just Switzerland, Indians hiding less money in other tax havens too

Almost $3 billion has come back to India in Swiss Francs over the past few years and non-bank deposits of Indians in other tax havens have dipped

The Narendra Modi government, which came to power promising to curb and bring back illicit wealth parked by dishonest Indians abroad, may have walked the talk – at least for the moment. Information from the Bank for International Settlements (BIS) shows that there has been a significant decline in the amount of money held by Indians not just in Switzerland, but also in other nations that are considered to be among the most secretive financial and low-tax jurisdictions in the world.

BIS classifies such money held by people across the world as “non-bank loans and deposits”. Finance Minister Piyush Goyal had, on Tuesday, said that these non-bank loans and deposits gave a better picture of black money stashed by individuals and corporates, as they did not include inter-bank transactions. Goyal was defending his government while claiming that there had been a 34.5 per cent decline in the money held by Indians in Swiss banks in 2017, from the previous year.

Information with BIS shows that the amount of money stashed by Indians in Swiss banks has indeed declined by almost 80 per cent between 2013 to 2017. In 2013, non-bank loans and deposits of Indians in Switzerland stood at $2.6 billion. In 2017, these deposits were down to $524 million. But this is part of a larger trend of declining non-bank deposits held by Indians in Switzerland. Between 2009 and 2013, when the Manmohan Singh government was in power, these deposits had dropped by almost half. In 2009, Indians held $5.6 billion in such deposits in Switzerland. Curiously, there has also been a significant rise in the amount of Swiss Francs flowing into banks in India. According to BIS, almost $3.3 billion has come to India in Swiss Francs between December 2015 and March 2018. BIS doesn’t provide information of such flows into India prior to the quarter ending December 2015. In 2015, almost $1.4 billion came to India in Swiss Francs. This rose to almost $1.6 billion in 2017. In the first quarter of 2018, more than $500 million came into India in Swiss Francs.

Switzerland is not alone. Other nations that rank high up on the Financial Secrecy Index published by the Tax Justice Network every year exhibit similar traits. Take the case of Jersey, which ranked among the top 20 nations that contribute to global tax avoidance and tax evasion. Between 2013 and 2017, non-bank deposits held by Indians in this small island off the British coast fell by almost a third. In 2013, Indians held $1.3 billion in Jersey. By 2017, these non-bank deposits were down to $888 million. According to BIS, such deposits held by Indians in that territory had hit a peak of $2.7 billion in 2008. They fell for a few years before rising again in 2011. However, such deposits have been falling ever since. (See Graphic)

A similar scenario is unfolding with the money stashed by Indians in Luxembourg – a nation that features in the top 10 jurisdictions that encourage individual and corporate tax evasion according to the Financial Secrecy Index. According to BIS, non-bank deposits held by Indians in this tiny European nation fell by 70 per cent from 2013 to 2017. In 2017, Indians held $44 million. In 2013, such deposits by Indians in Luxembourg stood at $1.4 billion. These deposits have been consistently falling since 2012, but the decline has been more pronounced under the Modi government. While these nations have seen huge falls in the amount of non-bank deposits by Indians, there are others where the decline hasn’t been as stark.

Take the case of Guernsey, another British Crown dependency off the French coast, which ranks 10th on the Financial Secrecy Index. Unlike other nations, Indians do not hold much money as non-bank deposits here. According to BIS, Indians held $74 million in 2014 which declined to $64 million in 2017. Then there is the curious case of Hong Kong -– a jurisdiction that could well be thorn in India’s flesh when it comes to fighting money laundering and tax evasion. Unlike all other nations, there has been a significant increase in the amount of non-bank deposits held by Indians in that territory. Indians now hold as much money in such deposits in Hong Kong that they used to in Switzerland in 2010. BIS, which has been providing information on this Asian nation only since 2015, has some interesting trends. 

In 2015, Indians held $3.8 billion in non-bank deposits in Hong Kong. In 2017, such deposits stood at $4.6 billion -– a rise of 21 per cent during Modi’s tenure.

Clearly, Modi may have the bragging rights for being in the saddle when illicit money stashed by Indians in Swiss banks is at an all-time low. But Hong Kong, which is among the world’s top five nations attracting black money, could just be a different ball game altogether.