PM on Prowl, Tax Havens lose Magnetism

NEW DELHI:Money makes the mare go, and it seems to have gone. From 2012 through 2014, overseas investment by Indians grew by an astonishing 700 per cent in the British Virgin Islands, a favourite tax haven for biz pashas with big bucks.

After Narendra Modi — whose war was to bring black money back to India — came to power, the amount fell to Rs 611 crore from Rs 18,015 crore.

British Virgin Islands witnessed huge capital investment by Indians between 2012 and 2013.

Interestingly, this was the period when the UPA regime was facing heat from Opposition parties and socio-political activists to prosecute those responsible for moving ill-gotten money into offshore accounts.

The Finance Ministry recently revealed that approximately $425 million (Rs 2,709 crore) was invested by Indian companies in British Virgin Islands during 2012-13 using the legitimate route of capital investment, including equity, loan and guarantee, invoked.

The very next year, the amount rose by 700 per cent and $2,827.21 million (Rs 18,015 crore) was moved to British Virgin Islands through the legitimate route of Overseas Direct Investment (ODI). However, the ODI dipped to merely $96.21 million (Rs 611 crore) after NDA II stormed to power.

According to the Department of Economic Affairs, the government has taken several steps in the last three years to promote capital investment in foreign countries. It said the ODI under the automatic route which was reduced on August 14, 2013, from 400 per cent of the net worth of the Indian party to 100 per cent, was restored to 400 per cent in July 2014.

While investment made by individuals or other entities may not have broken the law or the individuals or entities may not have acted improperly to hide details, the details of investment made in famous tax haven countries or countries with little to offer besides registration of mail box entities are indeed intriguing.

For example, investment in Switzerland in 2012-2013 was $513.82 million (Rs 3,269 crore). Known as the Mecca of black money, the country witnessed another $414 million (Rs 2,638 crore) investment from India in 2013-14.

Similarly, $138.9 million (Rs 879 crore) was moved as investment to Bermuda, whose economy is based on offshore insurance, registration of mailbox companies and tourism.

This offshore financial centre with no corporate income tax is considered to be a popular tax avoidance location for multi-national companies. The highest capital investment by Indians in 2012-13 was made in Mauritius, with $1,763 million (Rs 11,234 crore).

In the current fiscal, $580 million (Rs 3,696 crore) has been invested in the country, known as the safest route to wire ill-gotten proceeds. Mauritius popped up in scams like VVIP choppers, Aircel-Maxis and Antrix-Devas.
Singapore a Favourite for Indian Bizmen

Singapore witnessed huge and steady investments by Indians. Since 2012-13, $4,818 million (Rs 30,703 crore) has been invested by Indians in Singapore.

Netherlands appears to be another favourite of the Indian biz community. While $1,050.67 million (Rs 6,691 crore) was invested in 2012-13, a whopping $1,778.33 million (Rs 11,330 crore) capital investment was made in 2013-14. In the current fiscal, $723.32 million (Rs 4,607 crore) investment has already been made.

Another surprise destination for huge capital investment is the Bahamas, where $54.67 million was invested in 2012-13 followed by $17.1 million in 2013-14 and $32.76 in 2014-15. Southeast African country Mozambique, which in 2012 discovered large natural gas reserves, witnessed a sudden investment of $2,643 million (Rs 16, 842 crore) in 2013-14. In 2012-13, the total investment was only $0.47 million. After a spurt in investment in 2013-14, there was sharp decline in the current fiscal: only $3.68 million.

British Virgin Islands, which earns its 60 per cent revenue by registration of covert entities, has nothing substantial to offer to the Richie Rich looking to invest. With an export revenue of an average $40 million and imports worth $400 million, the country has tourism as the main business besides providing mailbox companies to shadowy operators.

The finance ministry said that on March 5, 2013, resident individuals were permitted to undertake Overseas Direct Investment (ODI) in the equity of overseas joint ventures/wholly owned subsidiaries under the automatic route within the overall ceiling under Liberalized Remittance Scheme (LRS) subject to the compliance with certain conditions. The ceiling was increased from $75,000 to $125,000 per financial year per head for any permitted capital or current account transaction or a combination of both through a notification on June 3, 2014.

In June-July 2014, The International Consortium of Investigative Journalists revealed a list of covert firms using complex offshore structures in the British Virgin Islands and other offshore hideaways famous for providing shelters to money-launderers. It disclosed names of 665 Indian businessmen and entities registered in these tax havens. The leak raised suspicions on investment in a country with a labour force of just 12,000 people.