India has third highest trade related money laundering

Update: 2020-03-04 01:24 IST

New Delhi: India has the third-highest trade-related illicit financial flow among over 135 countries with a whopping $83.5 billion escaping the government's tax net owing to trade-based money laundering tactics, according to a report released on Tuesday by US-based think tank Global Financial Integrity (GFI).

The GFI classifies as illicit flows funds which are illegally earned, transferred, and/or utilised across an international border. The primary sources of illicit flows include grand corruption, commercial tax evasion, and transnational crime. A drug cartel using trade-based money laundering techniques to use the illegal proceeds of narcotics sales to purchase used cars, which will be exported to the drug source country and sold, is an example of illicit financial flow, it said.


According to the report titled "Trade-related Illicit Financial Flows in 135 Developing Countries: 2008-2017", for 2017, five countries with the largest identified value gaps were China at $457.7 billion, followed by Mexico at $85.3 billion, India at $83.5 billion, Russia at $74.8 billion, and Poland at $66.3 billion.

About the value gaps identified for India, GFI's senior economist Rick Rowden said a good way to think about a value gap is "the amount of trade that was not properly taxed" by the governments of the importers and exporters involved.

"This is why GFI believes the practice of trade misinvoicing is such a big problem - it leads to huge amounts of trade that are not being properly taxed, thus countries are losing out on billions of dollars of uncollected trade taxes each year," Rowden said. 



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