Black money - got any ideas?

    So the Government is seeking ideas from simpletons like you and me to combat the problem of black money. They have even created an email-id , bm-feedback@nic.in to send in ideas. A cynical observer would think this is just another dog and pony show. I am going to take the bait and offer my sparkling idea.

    The overall amount of black money in tax havens is estimated at about $500 billion. Some say that the figure could be as high as $1.4 trillion. Since we are not sure , i am going to assume it is about $250 billion - a low-ball figure to be sure.

   My solution has two two parts to it. Step one, get the tax haven countries to share account information. Step two,create a framework to repatriate that money.

   First, offer a free trade agreement to the relatively clean tax-havens like Switzerland. Their banks will be allowed access to the banking and financial sector of a growing Indian economy in exchange for concrete information of illicit accounts held in their countries. Build pressure on tax haven countries that are unwilling to co-operate. This could be a real possibility.

"It is a big issue in India. At the same time, it is a global issue. People are uniting against it." Owens said. He said the OECD had adopted a set of criteria for blacklisting tax havens if they refuse to cooperate.

"We are making sure that all countries, including OECD member countries like Switzerland, Luxembourg and Austria, implement the decisions. Otherwise they will face sanctions," said Owens.

The Paris-based OECD, a grouping of 34 countries, accounts for nearly 80 percent of world trade. Although India is not a member, it has close relations with OECD and has joined its multilateral platform initiative to check tax evasion and money laundering.

    Assuming that the total value of illicit money is close to my estimate of $250 billion , a reasonable mechanism has to be put in place to entice the repatriation. Levy a 40% tax on the money stashed away. That would yield a revenue of $100 billion to the exchequer. Make it mandatory for the other 60% of the money(a total of about $150 billion) to be invested in an independently constituted Infrastructure development fund.
    Long term Infrastructure bonds would be issued and a reasonable interest would be paid out. That way, the erstwhile tax evaders can still keep part of the money and earn some income out of it. The infrastructure fund can then leverage itself to a ratio of 1:10. With a capital of $150 billion , it could borrow up to $1.5 trillion for investments in infrastructure. That could easily satisfy the investment needs for the next five year plan.

Alright, the whole idea may sound infeasible. But,i am not offering unsolicited advice. I was wondering if you folks had any thoughts ? If there is something to offer, post your views as comments. I will collect them all and send an email to bm-feedback@nic.in.