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INDIA: Illicit outflow of funds from developing countries a matter of concern

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Minister of State for Finance Jayant Sinha has estimated that over $300-600 billion illicit fund moves out from developing countries including India to developed countries through money laundering and other ways. He said 'Illicit financial flows means the money that actually is black money, and it is then sent over to tax havens. And in India, a lot of it is happening through trade based money laundering, over-invoicing or under-invoicing and a variety of other ways and then money is leaving the country simply through hawala channels'.

Sinha further added that there is a lot of capital that is going out of the developing world and into the developed world because of transfer pricing. Through transfer pricing mechanism multinationals move profits to low tax countries and tax havens, thus reducing their tax liability. Illicit financial flows are estimated to be much higher than those going out by transfer pricing and capital gains. The government has taken number of  steps, including enactment of the black money law, to deal with unaccounted overseas assets.

Referring to the current financial condition caused by yuan devaluation, Sinha reportedly said that India has a big opportunity to shine as the world is facing more turbulence and slower demand. With the ease of doing business India has a chance to be a very attractive investment destination and be able to attract funds both from domestic and international investors.