Fighting Imported Corruption

Indians are furious and astounded about recent corruption cases, where large ill-gotten funds have vanished. In an essay for Business Standard, Devesh Kapur and Arvind Subramanian blame the ease in cross-border transfer of funds. The pair contends that as money is concentrated in fewer hands, it’s secretly transferred to tax-free domains beyond national borders and then returned as valued foreign investment. India loses tax revenues, but the schemes also destroy incentives for government to investigate. Transfer often takes place through remittances, services with inaccurate invoices or exchanges through subsidiary firms. “There is something odd when FDI that comes from Cyprus is as much as that from both France and Germany, or when Mauritius accounts for more FDI into India than all the G7 countries,” note Kapur and Subramanian. The essay concludes with recommendations on national and international policies that would end the illicit cross-border transfers and corruption, including governments cooperating on tracking their citizens’ overseas assets. – YaleGlobal