The black money chase

B.R.P.Bhaskar
Gulf Today

According to a message circulating in cyber space, a Swiss bank official has said Indians are holding “280 lakh crore rupees” (about $606,000 million) in secret accounts in that country. It is safe to assume the figure was cooked up locally. After all, a Swiss bank official is unlikely to use very Indian terms like “lakh” (100,000) and “crore” (10 million).

Also in circulation is a purported extract from a Swiss Banking Association report of 2006 which says Indians hold the most black money in banks there. The five countries mentioned in it as the biggest sources of black money are: India $1,456 billion, Russia $470 billion, UK $390 billion and Ukraine $100 billion.

These figures, too, appear to be fabrications. The Association’s annual reports for several years, including 2006, which are available on the web, do not contain any information about foreign black money deposits. The Global Financial Integrity (GFI) report of the US-based Center for International Policy, published this month, says the developing countries had lost about $6.5 trillion during 2000-09 on account of illegal money transfers. Its list of 10 countries which suffered the most losses does not include India.

The fact is that there is no reliable data on money held abroad by Indian nationals. However, last week, the Supreme Court, while hearing a set of public interest petitions, appeared ready to give credence to reports that Indians hold an estimated $1 trillion in foreign bank accounts.

The petitions, which have been pending before the court for nearly two years, are now receiving increased attention in the light of recent revelations about various corrupt deals, including the 2G scam, which led to the resignation of a central minister.

The government’s counsel handed over to the court in a sealed cover a list of 26 Indians with secret bank accounts in Liechtenstein, obtained from the German authorities. He informed the court that the Income-tax department had raised a demand of Rs242.6 million from the 18 resident Indians whose names figure in the list. The court expressed displeasure at the government’s inability to get information about money held in other tax havens. It also upbraided the authorities for focusing on tax evasion, overlooking corruption and other criminal acts involved in the generation of black money, and called for a comprehensive report by Thursday.

Black money, generated in the country and stashed away in foreign banks, has been a source of worry for the Indian authorities for a long time. To begin with, the offenders were mainly industrialists who under-invoiced exports and over-invoiced imports. Corrupt politicians and officials are believed to have joined their ranks later.

The government offered amnesty on a few occasions with a view to drawing black money into the tax net. The efforts were not great successes.

Switzerland is probably the most favoured parking station of Indian black money. Under an agreement negotiated last year, the Swiss government was to give India access to secret bank accounts of Indians beginning this month. Since the Swiss parliament has not adopted the necessary protocol, the agreement has not come into force yet.

The Indo-Swiss agreement has only limited application. It cannot be invoked to seek information about pre-existing bank accounts. Even with regard to new accounts, the Swiss commitment is confined to providing administrative assistance to track cases of tax evasion and fraud. The Swiss Bankers Association has said it will not permit “fishing expeditions.”

With the apex court calling for action to unearth black money and the Bharatiya Janata Party, the main opposition, demanding a law to track down money in secret foreign accounts, pressure is mounting on the government to act.

According to S. Gurumurthy, a chartered accountant and columnist who has a record of exposing some corporate misdeeds, the government lacks the will to go after foreign bank accounts since its own leadership is not free from blemish. In this context, he cites a 1991 article in Schweizer Illustrierte, a Swiss magazine, which said Sonia Gandhi, who is now chairperson of the ruling United Progressive Alliance, was controlling secret accounts with 2.5 billion Swiss francs (equal to $2.2 billion) in her son’s name at that time.

Gurumurthy, whose pro-BJP sympathies are well-known, steers clear of the question why the BJP did nothing to bring back the money in foreign bank accounts when it was in power from 1999 to 2004. Obviously there is more in the black money issue than meets the eye. -- Gulf Today, Sharjah, January 24, 2011.