Unending black money chase

BRP Bhaskar
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. -- Gulf Today, Sharjah, November 4, 2014.

Another scandal to ride through

BRP Bhaskar
Gulf Today

Governmental and business circles, inured to periodic breaking of scandals, are seeking to brazen out the unearthing of several hundred offshore accounts of Indians in the British Virgin Islands and other tax havens by an international team of journalists.

Scions of old industrial houses as well as nouveau riche of the era of globalisation are among the 612 Indian nationals who form part of the 2.5 million individuals and entities in over 170 countries, whose names have been revealed by the International Consortium of Investigative Journalists (ICIJ) in the first batch of reports yielded by a continuing probe.

Launched in 1997 as a project of the Washington-based Center for Public Integrity, the ICIJ is a network of 160 journalists in more than 60 countries engaged in investigation of corruption and cross-border crime. The team is led by Irish-born Gerard Ryle whose award-winning investigative reports on use of orphaned babies for medical experiments and the Firepower fraud in Australia had attracted attention worldwide.    

The ICIJ offshore operations probe was made possible by more than 260 gigabytes of data which Ryle received by mail while investigating Firepower which was said to cut petrol consumption and vehicle emissions. It included about 2.5 million files and more than two million emails that helped chart offshore activity over several years.

Responding to queries, Finance Minister P Chidambaram said, “Inquiries have been put in motion in respect of the names that have been exposed.” Such pronouncements were made by government spokesmen after information about secret bank accounts of Indians in Switzerland and Liechtenstein came to light but they did not lead to any action.

Opening offshore accounts is not a crime but their structures are designed to conceal actual ownership and they are often used for illegal purposes like tax evasion. Interestingly, almost all the Indian accounts uncovered by ICIJ were opened during the economic boom of the last decade.

The Indian Express, which published information about the account holders, contacted them to find out what they have to say. Some responses suggest that they have something to hide. 

While the ICIJ report named several persons with high political connections in Azerbaijan, Colombia, France and the Philippines, no Indian politician of consequence figures in it. The two MPs in the list, Vijay Mallya and Vivekanand Gaddam, are political lightweights.

Some including Vivekanand Gaddam, Sonu Lalchand Mirchandani of the Onida group, Teja Raju, son of Satyam Computers founder Ramalinga Raju who was jailed in a fraud case, and Gurbachan Singh Dhingra of Berger Paints pleaded ignorance about the accounts in their names.

Some others like Samir Modi of the KK Modi group, Chetan Burman of the Dabur group and Thiagarajan Murugesan of the Paramount group said they had opened offshore accounts to attract investments or boost exports but the plan did not work out. Lankalingam Murugesu, known as ‘papad’ king, said his firm set up an offshore operation for better tax planning but did not use it. “We just thought it is better to pay full taxes,” he told the newspaper.    

Mallya’s firm, Ravikant Ruia of the Essar group whose name has come up in the telecom spectrum scam and Maitreya Vinod Doshi of the Premier Ltd said the Indian authorities had been informed about their offshore accounts. Radhikaraje Samarjitsinh Gaekwad of the erstwhile Baroda royal family and Rahul Mamman Mappilai of the MRF group did not respond.

Two years ago the authorities had received from a foreign government the names of 782 Indians with accounts in the Hongkong and Shanghai Banking Corporation’s branches outside the country. They refused to reveal the names on privacy grounds. The promised investigations did not lead to any action.

Cobrapost, a website, came out with a sting report alleging  the ICICI Bank, the Axis Bank and the HDFC Bank helped in money laundering. The Reserve Bank of India was said to be “seriously looking into the matter” but the Finance Minister gave the banks a virtual clean chit saying, “On the face of it, no real money was transacted and no real money laundering deals took place with any real person.”

When a financial scandal involving private players breaks out, the government goes through the motion of conducting an investigation but it does not result in action against the wrongdoers. The Supreme Court recently remarked that the government’s failure to control black money was indicative of its weakness and softness. -- Gulf Today, Sharjah, April 9, 2013.