For some weeks now, L K Advani has been proclaiming that if the BJP-led NDA coalition comes back to power, it would facilitate the recovery of black money stashed by many Indians in tax-free havens abroad, hopefully within a hundred days. According to one estimate, the illegal money secreted abroad in tax havens varies between $ 500 million to $ 1.4 trillion! That is equivalent to Rs 70 lakh crore which is more than India's national income of around Rs 50 lakh crore!
Who are these people who have been cheating India for years now? They include importers and exporters, industrialists, people who have received kickbacks from major defence and civilian contracts, and even cinema and sports stars. According to R Vaidyanathan, Professor of Finance and Control, Indian Institute of Management, Bangalore, whose report in the April issue of Eternal India is an eye-opener. India should join hands with different world bodies, including the G-20, to recover the money. It can be done?according to one source?easily.
Apparently the German Government has announced that it would share information on accounts held in tax havens with any government that wanted it. Shri Vaidyanathan, who can be contacted at vaidya@iimb.ernet.in quotes the spokesman for the German Finance Ministry, Thorsten Albig, as indicating that they would respond to such requests without charging any fees for the information. Why has the UPA government been keeping quiet all these years? It would seem that throughout the Nehruvian so socialistic period, under-invoicing of exports and over-invoicing of imports was very common and the monies thus illegally raised was put in safe custodies of banks in Antigua, Switzerland, Bahamas, Lichtenstein, Isle of Man, St Kitts etc.
Foreign tax havens can be force to reveal the origins and nature of illegal accounts they have been holding. It would seem the under pressure from the US Federal authorities, a well-known Swiss bank, known as UBS has closed down hidden offshore accounts of its well-heeled American clients, potentially allowing their secrets to spill out into the open. UBS will be shutting down 19,000 accounts that prosecutors suspect have gone undeclared to America'sInternal Revenue Service. Incidentally, the UBS reportedly paid a penalty of over $ 800 million to the US disclosing the secret accounts of three hundred American depositors.
Writes Vaidyanathan: ?But in India, the same UBS paid a paltry penalty of a few lakh rupees to the Securities & Exchange Board of India (SBI) for not disclosing the names of secret PN holders whose funds it had invested and settled the case just a couple of weeks back?. PN stands for Participatory Notes. The PNs are preferred instruments of investment. The money invested in India through PNs between 1994 and 2004 was of the order of Rs 31,875 crore. This burgeoned to Rs 3,53,484 crore by August 2007, an increase by over 11 times in 40 months. The investors are all nameless. They participate in our markets invest and disinvest stocks worth billions of dollars and make and repatriate profits. And no questions asked.
Indeed, according to Vaidyanathan, India has shown marked disinclination to lay its hands on the data pertaining to illicit money kept by Indian nationals in secret bank accounts, and to strive to get back the Indian wealth hoarded in Swiss and other banks. Vaidyanathan makes the charge that while things are moving fast and the very western nations which once encouraged the Swiss Banks? secrecy are now against secret banking, ?the Indian representative at the G-20 preparatory meeting in Berlin did not utter any word of support for the move?.
Prime Minister Dr Manmohan Singh owes an explanation to the Indian people. Vaidyanathan adds: ?If India joins hands with the Organisation for Economic Cooperation and Development (OECD) and G-20 nations and a deal comes through between the G-20 and different tax havens, particularly Switzerland, the process to recover Indian monies can be much shorter and hugely successful?. And if it becomes successful, Indian Foreign Exchange Reserves will get a tremendous boost; India can then really compete with China whose reserves are ten times that of India?s. But more importantly, the money will facilitate infrastructural development.
According to Shri Pranab Mukherjee, it is not true that the UPA government has not given thought to the issue. According to him, the government has been mounting pressure on the Financial Action Task Force (FATF) and other similar regional bodies under its umbrella like Asia Pacific Group on Money-Laundering and Counter-Financing of terrorism. He also said that after amendments to the Prevention of Money Laundering Act were passed by Parliament last February, the matter was taken up at the FATF Plenary held in Paris, where they have agreed to mutual evaluation which was pre-requisite for granting Indian membership of the body. Mukherjee hopes that India would get the Membership soon, after which it would be easier to handle tax evaders.
What is surprising is that though tax evasion had started during the Nehru era, it has taken the Congress Party six decades to wake up. It doesn'tspeak highly of the Congress. Was it lethargy, was it forgetfulness or was it deliberate? What is shocking to learn is the casual way in which Indians at many economic levels ?and from various segments of life?have been making free use of Swiss banks for stashing money. Vaidyanathan estimates that ?at least? 60,000 Indians visit Switzerland?and not all going there to learn ski-ing. Interestingly, Zurich in Switzerland is the only European city with trams sporting Hindi slogans on their sides! That says something about the Swiss desire to pander to Indian tax evaders who probably outnumber similar people from other?especially developing ?countries.
Asia as a whole apparently accounts for approximately 50 per cent of overall illicit financial flows from all developing nations. The average money taken away from India annually during 2002-2006 is supposed to be around $ 27.3 billion. Which means in those five years the amount stashed away equalled $ 136.5 billion or about half of India'sForeign Exchange Reserves. It is something to ponder over. Instead of constantly talking about secularism, our political parties can talk about money stashed abroad and how to get it back. L K Advani has made a good start. He needs the support of all decent-minded voters in India.
Comments