Congress won’t crack down on illegal money – Part 2


The whole issue is becoming curiouser and curiouser. But later the Government, in a brazen manner says the recovery of tax arrears of about Rs 91,000 crore from stud farm owner Hassan Ali Khan is not possible. “In Hassan Ali Group, the recovery is not possible though all known immovable and moveable assets belonging to the group have been attached,” the Finance Ministry said in its submission before the Standing Committee on Finance.

Not only that, the list of illegal money holders from Lichtenstein Bank (provided by German Government) is available with the Government of India along with the major list of depositors from HSBC Geneva. As far as the list provided by the German authorities is concerned, the Government maintains that it cannot reveal the names since they have been obtained under the double taxation treaty from Germany. The Government also says that it is proceeding against the account-holders under tax laws. A report in The Economic Timessuggests that out of the 50 names in the LGT list, 25 belong to Mumbai. It also says that none of the 25 account holders are big industrialists or well-known individuals. As if big industrialists and politicians are going to hold it under their names! It will be held under benami names.

At last the Government says there are names — from Liechtenstein.

» Why did the Government of India ask information under Double Taxation Treaty with Germany when the issue  Liechtenstein Bank stolen Data by Germany — does not have any link to that.

» Did the Government think that Germany will not respond if it is asked under the Double Taxation treaty?

» Where is the issue of Confidentiality vis-vis criminals? Germany has released their own list. How can they ask India to not release it?

Finance Ministry says it has names but will not reveal and the affidavit suggests that the petitioners should go the RTI way — perhaps only to be denied information.

There are categories of culprits. Some are traditional business leaders who have been accumulating from the fifties, some are new rich entrepreneurs, politicians and bureaucrats who influence decision-making for large global purchases. The third category is money launderers who do it for nefarious purposes including financing terrorism.

The business groups would be more than willing to bring it back. Already they are suspected to be doing it using the participatory note process in the stock market. The returns in India are very attractive and India is one of the few countries which growing at more than six per cent even in the midst of global meltdown. Plus the severe actions contemplated against the tax havens by the OECD countries will also be a cause of concern for Indian holders of illegal funds.

Hence, Government should think of  providing a window of opportunity for the business / bureaucrat / politician groups to bring the money back with suitable grace period and penalty on the quantum of funds and also specifying the instruments (like infrastructure bonds) where the funds should be invested. Beyond the moratorium period of, say, six months, Government can decide to completely nationalise any funds kept abroad  that is those funds will be frozen into a Government account as and when the facts about them come to the Government’s knowledge.

As far as the illegal funds kept for nefarious purposes are concerned, it is imperative that the Government raises the issue in multilateral forums like G-20 and even UNSC and get common legislation enacted to get in to the funds of tax havens. Bilateral treaties have limitations since many of these jurisdictions are non-transparent and to start with created with a purpose of holding illegal wealth.

Government of India can also create a ‘Truth and Reconciliation’ commission which would facilitate distinguishing between the funds and the holders. It will also help in voluntary confessions with penalty for those who have accumulated funds abroad to evade taxes. It can distinguish between shades of criminals and recommend to the government for acting accordingly.

Also, the persons who have accumulated funds abroad should be barred from holding any public office and getting loans from banks etc. as a form of punishment. If all the fund-holders are treated only as tax evaders, as is currently done in the case of LGT bank list, then they will continue to have privileges like access to bank funds etc. and the criminal nature of their actions will never be known.

Our clean political leaders have to gather the courage to act now. There is a report in India Today dated February 18, 2008 regarding the foreign travels of the Ministers of the Central Cabinet states that large numbers of them have visited Switzerland including side personal trips not definitely for skiing in Alps. Hence we can say that there are three issues  the total amount of illegal money stashed abroad, the amount of illegal money kept by Indians in various tax havens and the amount kept in Switzerland. On the first issue, developed economies are taking appropriate actions. On the second and third issue we are debating about the need to provide exact pin code address and pan number of the culprits before even we debate!

Going back to the earlier issue of the deafening silence of our business media, both print and electronic, we can surmise that hedge funds etc. have invested in many of these TV companies and it could be through or from these tax havens. That might explain the eloquent silence. But as the proverb goes in Tamil, can a pumpkin be completely hidden in a katori of curd rice? The Swiss vaults will be opened up with or without India’s role. If it happens as a ‘Collateral benefit’ to India, then it will make us a banana republic worse than Sani Abacha’s Nigeria. The money kept abroad can be fruitfully employed in developing our infrastructure and to that extent it is a beneficial inflow for India if it is brought back.

The choice is ours. Either we play our necessary role in the global forums and by domestic actions are a facilitator to get our money, or we become a laughing stock when the India list is published in some American or European news portal.


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