Black money trail: Indian companies still parking funds in tax havens

NEW DELHI: The top 10 investment destinations for Indian companies in the last three years are all tax havens, if the US and UK which figure at number 4 and number 8, respectively, are discounted.The statistic, released by the finance ministry, reinforces the belief that the government has failed in curbing the flow of black money out of the country. Around 40% of the total investments in these three years have been in real estate, insurance and financial instruments, where it is very difficult to establish purchase value of such assets.One of the prominent avenues used by tax evaders is round-tripping of investments. The quantum of such investments as a proportion of India's total outbound investment reveals how it is not the developed or the emerging economies that has been attracting Indian investments, but just a tax-friendly jurisdiction that doesn't ask for the source of such money.Singapore, Mauritius, the Netherlands, Cyprus, British Virgin Island, UAE, Cayman Island and Channel Island dominated the list, with a major share in Indian companies' total outbound investments since 2009-10.Out of nearly $31,450 million invested by Indian corporations in the last three years, capital invested in real estate and financial instruments was $12,703, almost 40% of the total outbound investments.After domestic revenue intelligence agencies enhanced their surveillance on the flight of capital to British Virgin Island, Cayman Island, Hong Kong and Channel Island, the most favoured destinations in the past three years are Singapore, Mauritius and Netherlands. Most of these jurisdictions are notified by the government as "special territories" and efforts are being made to negotiate exclusive pacts to facilitate exchange of information on tax evaders, including with Singapore and Mauritius.After the trail of several money-laundering cases ended in Hong Kong and the Netherlands, the government notified Hong Kong as a 'specified territory' in April last year. Earlier, the government had notified nine other jurisdictions to facilitate information that would help track cases of money-laundering and tax evasion.The notification enabled India to enter into a double taxation avoidance agreement with all of them. The nine other specified territories included Bermuda, British Virgin Island, Cayman Island, Gibraltar (all British overseas territories); Guernsey, Isle of Man, Jersey (all British Crown dependencies); Netherlands Antilles (an autonomous part of the Kingdom of the Netherlands); and Macau (a special administrative region of the China).

The top ten destinations during the last three years where Indian companies have invested

----------------------------------2009-10--------------2010-11---------------2011-12(Apr-Nov)

1. Singapore----------------------3798.49-------------3980-18-------------1522.95

2. Mauritius----------------------2148.38-------------5045.83--------------1703.29

3. Netherlands-------------------1529.90-------------1516.63----------------616.55

4. US------------------------------870.35--------------1206.98----------------606.94

5. British Virgin Island---------747.49---------------281.06----------------344.98

6. UAE----------------------------637.47---------------839.86----------------238

7. Cyprus-------------------------458.35---------------517.25----------------NA

8. UK------------------------------344.95--------------402.45----------------219.72

9. Cayman Island------------------NA----------------439.31----------------98.14

10. Channel Island---------------515.57--------------NA----------------------NA

(Figures in $ million; source: Finance ministry)