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BRP Bhaskar: Unending black money chase
November 04, 2014
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Exclusive to The Gulf Today

Prime ministers come and go, chief justices come and go, but the Indian black money chase goes on for ever.

The Supreme Court has been seized of the black money problem for several years. The pace of the proceedings is so slow that a final outcome cannot be expected for many more years.

The Bharatiya Janata Party raised the black money issue in its parliamentary election campaign, and Narendra Modi vowed to bring the money hoarded abroad back within 100 days if he became the prime minister.

As the deadline he had set passed with no new development, the government came under attack for dragging its feet the way the previous Congress-led United Progressive Alliance government had done.

Responding to the criticism, Finance Minister Arun Jaitley said the Congress party would be embarrassed when the names of the account holders came out. Later the government revealed three names, whose foreign accounts were under investigation.

The Modi government, like its predecessor, claimed that the double tax avoidance agreements signed with other countries prohibited it from disclosing names of holders of foreign accounts except in connection with legal proceedings. As investigations progressed, more names would be released, it said.

This, coupled with leaked reports that a former Congress minister was under investigation, led to speculation that the government planned to disclose information selectively to derive political benefit.

Hopes rose momentarily when the Supreme Court directed the government to give all the names to it in a sealed cover within 24 hours. On receiving the list, the court turned it over to the special investigation team (SIT) headed by two retired judges chosen by it earlier this year.

SIT chairman MB Shah, who opened the cover, found it was the same list the government had given to it directly earlier. It contained the names of 627 Indians who had accounts in the HSBC Bank in Geneva. The list, extracted from the bank’s records by an employee in 2006, was turned over to India by the French government in 2011.

The SIT chairman said investigation of those figuring in the list would be completed by March 31, 2015, as directed by the apex court.

When information about secret foreign bank accounts is received, the Indian government’s standard practice is to collect tax on the concealed income and close the case. There is no prosecution.

The HSBC list, which contains no big names, is already several years old and the account holders may have taken out all the money by now. According to Income Tax officials, the average amount in the accounts was about Rs500 million, and the government can at best hope to get about Rs30 billion by way tax and penalties.

A fair estimate of the extent of wealth hoarded abroad can only be made when details of accounts in other banks in Switzerland as well other tax havens become available.

Early this year the Swiss National Bank said Indian entities held over two billion Swiss francs (Rs140 billion) in 283 banks in that country. All of it may not be unaccounted money.

Switzerland has said it is ready to provide details of individual accounts if the information is required in connection with any investigation but there can be no ‘fishing expedition’. Obviously due diligence is needed to get information on the black money accounts.

Three years ago, the Washington-based research group Global Financial Security estimated that Indians held $644 billion in tax havens.

Professor Arun Kumar of Jawaharlal Nehru University, who once estimated Indian black money, circulating at home and parked abroad, at $2 trillion, rubbishes the government’s claim that the double taxation avoidance agreements hinders pursuit of money held abroad. He commends the example of United States courts which forced the Swiss to reveal the names of about 4,500 American account holders.

In a broadcast on Sunday, Modi said no one knows how much black money is stashed abroad. Sensing that people doubt the government’s ability to bring the money back, he asked them to trust him.

Incidentally, two of the three persons whom the government named publicly as holders of illegal foreign accounts said they had done no wrong. One of them had made substantial donations to both the Congress and the BJP — more to the BJP than the Congress. There lies the crux of the matter.

It is widely believed that black money in secret foreign accounts flow into the country at election time.

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 The author is a political analyst of reckoning
 

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