Harish Gupta. NEW DELHI
It may sound strange, but true. The day Swiss government announced lifting veil of secrecy on all banking transactions required by the Indian authorities after April 1, 2011, there was huge withdrawal of money by investors from the tax-heaven nation. From April 1, 2011, the foreign investments virtually dried up from Switzerland as much as $700 million (Rs 2895 crores) has been withdrawn.
Latest figures revealed that if $3 billion came from Switzerland during the past two years, there was a net out-flow of $700 million in the first two months of the current financial year (April & May 2011). For the first time during the past ten years, there has been a negative flow and a net withdrawal of Rs 2895 crores took place, said a worried finance ministry official.
It is also revealed that nine other tax heaven countries have witnessed virtual non-activity in respect of investing money in India. For example, investors from British Virginia invested nearly $1.5 billion (Rs. 5812 crores) during the last two years. But the first two months of the year data revealed the amount was less than Rs two crores. The Caymen Islands, considered a huge tax-heaven for investors invested a mere Rs 1.70 crores in the first two months of the current financial year compared to Rs 6326.47 crores during the last two years.
The story remains the same for other six popular countries which used to invest heavily in India. In all, these ten nations invested Rs 754.15 crores during April 2011. But May was a shocker as the net out-flow was Rs 2850 crores.
Obviously, the mounting pressure on tax-heaven countries to disclose details of flow of funds has sounded an alarm bells and reverse flow of funds has begun in a big way. The Swiss Central bank is not wide off-the-mark when it said that Indians have $2.5 billions deposits in various Swiss banks. Obviously, the wiser Indian investors have started taking monies out of these tax-heavens and taking it to other safe destinations.
If the investments from these countries has fallen, the flow of funds from Mauritius jumped to almost double.
Since Mauritius has signaled that it will take some more time in re-negotiating the controversial Double Taxation Avoidance Agreement (DTAA), the round-tripping is now through the Iceland country.
Investments from Mauritius broke all records in foreign investments as it sent more than $2.1 billion (Rs 9300 crores) to India during the first two months of the current financial year.
As much as 42% ($55 billion) of the entire foreign investments whether in the FDI or FII ($130 billion) has been routed through Mauritius between 2000-2011.