With the Finance Ministry now under the charge of the Prime Minister, this may be a good time for him to act on the black money front, writes Jyoti Malhotra.

Prime Minister Manmohan Singh seems to have set the cat among the pigeons by invoking the "animal spirits" of his countrymen in an effort to arrest the downward spiral of the economy.

It's another matter that the invocation came the day after finance minister Pranab Mukherjee left his North Block office for the building next door, even as stories of his acts of omission and commission in securing the national wallet began to flood the media. Which leaves us with one pressing question: Will this newly-acquired testosterone in the Prime Minister's Office (PMO) give way to a bull run on the bourses as well as provide new energy to the jaded question of how to recover good money stashed away in secret tax havens abroad?

Bringing back that money will kill two birds with one stone. It will buoy cautious investor sentiment and demonstrate that the PM, in his second - and probably last - term, truly means business. Estimates on how much money Indians have spirited away abroad varies considerably. The Swiss Banking Association has memorably stated that Indians have more money in its banks than the rest of the world put together. R Vaidyanathan, a professor at IIM-Bangalore, estimates it to be about $1. 5 trillion. Global Financial Integrity, a Washington-based thinktank puts the figure at a more modest $462 billion since Independence. But according to a white paper on the subject presented to the Lok Sabha in May, Indians held Rs 12, 740 crore in Swiss banks till end-2011.

So what is to be done? As the Sensex jumped to its second-highest level since Manmohan Singh returned to 7, Race Course Road in 2009 (the highest was in fact scaled the day after he returned to 7 RCR), India's top businesspeople proffered advice. They said the country should take a leaf out of the tax evasion pacts separately completed between Switzerland and Germany as well as the UK.

Such an arrangement would mean the Swiss could tax the unaccounted wealth in their Indian accounts, both capital gains and investment income, and then share that tax with India. In exchange, India would not ask the Swiss for names of tax offenders or how the money got there in the first place.

Consider, though, how the US has dealt with the Swiss regarding their own tax offenders, who might have preferred the Alpine nation's no-questions-asked treatment to their own country's not-so-kind grilling.

Using the 2008 recession as the stimulus for change, the Americans launched criminal investigation proceedings against 11 Swiss banks, including Credit Suisse, accusing them of helping US taxpayers evade taxes. In February, prosecutors indicted Wegelin & Company, Switzerland's oldest private bank (it was founded in 1741) on charges of helping Americans evade $1. 2 billion in taxes. The Swiss bank has since announced that it might even break up.

Proceedings against Wegelin & Co were launched even as the Swiss protested a violation of their 1934 banking law, which makes the revelation of client identities a crime. But the Americans were having none of it.

Finally, in exchange for deferred US prosecution, the Swiss agreed that their banks would be fined as well as "substantial" client data transferred to US authorities. UBS, Switzerland's largest bank, against which investigations had been launched in 2008, settled with the US Justice Department, paying a fine of $780 million and giving details of 4, 450 client accounts. The Swiss caved in because they knew they would otherwise be shut out of the huge US market. Moreover, tax evasion is a crime in most of the real world.

Meanwhile, Germany was cutting its own deal with the Swiss: German tax offenders would make a one-off payment between 21 per cent and 41 per cent of their undeclared assets in Swiss tax havens - higher than the 19-34 per cent initially planned - in exchange for no penalties. The Swiss would be charged with calculating and sharing tax with Germany, a minimum of 2 billion euros every year. Now the Germans want at least 10 billion euros, even as left-of-centre German MPs have vowed to continue to oppose the deal.

The UK formula, the weakest link in the international chain to crack down on tax havens, is to force taxpayers with Swiss accounts to pay a 48 per cent withholding tax and 27 per cent on capital gains. But the Swiss are not bound to pay a minimum guarantee to Britain nor will British offenders face penalties.

So what tax avenging route will our PM pick? Tax amnesty schemes accompanied by mild monetary punishment is hardly an option, not only because they have been tried before but because it is simply unfair to those who pay full taxes back home.

However, if the PM follows the Americans, he will not only deepen the blush on the blooming Indo-US relationship, he will end up engendering trust at home - the fundamental element for stoking the "animal spirits" he seems so fond of.

Considering he is now completely in charge at North Block, and with elections looming in 2014, this could be the perfect opportunity to complete the circle of reforms he launched under P V Narasimha Rao's leadership just over 20 years ago.