India says it has lost $500 billion to tax havens
Monday, February 13, 2012 at 6:15PM India, which recently signed on to an international convention designed to combat tax avoidance and evasion, has lost an estimated $500 billion to illegal deposits in overseas tax havens. Indians, according to India’s Central Bureau of Investigation AP Singh, are the largest depositors in foreign, particularly Swiss, banks. Singh lamented the lack of political will on the part of the havens to help investigate the illegal deposits, saying that their economies have become “geared to this flow of illegal capital.” He blamed the inadequate international cooperation and bank secrecy laws for the difficulties his department faces in getting back the “stolen wealth.” It is estimated that as much as 50 per cent of India's GDP is produced in the underground economy.
The Convention facilitates international co-operation for a better operation of national tax laws, while respecting the fundamental rights of taxpayers.
In signing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which was developed by the OECD and the Council of Europe in 1988, India joins thirty-one other signatories, including Canada, in allowing tax officials from one country to enter another country to conduct investigations into citizens’ tax compliance, including interviewing and examining tax records. It explicitly provides for the exchange of information in criminal cases involving tax. The information is also used to combat money laundering.
Under the terms of the convention, the rights of taxpayers are protected. The convention is set up so that if personal data are provided by one state to another, “the Party receiving them shall treat them in compliance not only with its own domestic law, but also with the safeguards that may be required to ensure data protection under the domestic law of the supplying Party (Article 22).”
The convention was last amended at the June, 2011 meeting of the G20.
Daily FX Commentary, February 14, 2012
President Obama’s budget proposal came and went yesterday with little fanfare, seen as a formality already predicated by his state of the union speech and more politicking, as anything the Democratic President brings forward is sure to be voted down in the Republican run House. While this is something to focus on later this election year, it begs the question of how we can expect government to work when it takes a whole year to hold an election. That’s 25% of a Presidents term.
The Bank of Japan surprised markets and eased policy today, boosting its asset purchase plan by 10 trillion Yen and setting an inflation target of 1%. This news sent the JPY lower against 15 of its 16 major currency pairs and through 78 against the USD for the first time since Jan 25.
Moody’s rating agency has followed S&Ps lead and downgraded six European countries including Italy, Spain and Portugal. “Policy makers have made steps forward but we do not think they have done enough to reassure the market that we are on a stable path,” said Alistair Wilson, chief credit officer for Europe at Moody’s in London. Moody’s also warned that it may cut the triple-A ratings of France, Britain and Austria. London has never had its prestigious triple A rating tarnished before.
European share markets continue to advance as German investor confidence rose to a ten month high. Analysts predicted the ZEW would rise to negative 11.8, down from January’s -21.6 reading. The actual number came in at +5.4, which is a very good sign from Europe’s largest economy. China’s Premier Wen Jiabao has also vowed to help the eurozone get through their debt issues with no specifics mentioned and no talk of any giant Pandas.
On this side of the pond investors are waking up to stock futures in positive territory and commodity futures in a bit of a mixed bag. We have retail sales and business inventories out of the US today. With only minor reports out of Canada we will continue to watch developments out of the Mediterranean for guidance.