Sunday, 7 June 2020

Plugging The Black Hole

Updated: February 19, 2011 11:17 am

It might appear amazing that what the entire world, including the man in the streets in India, knows about black money, our government says that it does not know or pretends not to know.

                Swiss Banking Association report, 2006 details top bank deposits in the territory of Switzerland by nationals of following countries: India $1,456 billion, Russia $470 billion, UK $390 billion, Ukraine $100 billion and China $96 billion.

                The government says that it has no idea about the extent of the money, which has been secreted abroad. It might be right, to a limited extent, as the legal banking channels are never used for sending and secreting illegal and tax evaded money. The Union Finance Minister says that the legalities prevent the government from disclosing the details of black money held abroad by the Indians. The interim recommendations of BJP Task Force 2009 have estimated the amount of black money to be between $500 billion and $1,400 billion, according to the Finance Minister. But a recent study by Global Financial Integrity has estimated the present value of illicit money outflow to be $462 billion.

                Union Finance Minister says: “All these estimates are based on various unverifiable assumptions and approximations. Government has been seized of the matter and has constituted a multidisciplinary committee to get studies conducted to estimate the quantum of illicit fund generated by Indian citizens…Legalities come in the way of detecting and recovering black money.”

                India is a sovereign republic and its Parliament is supreme. Legalities coming in the way of getting black are framed into the laws by the government. It is up to it to promulgate such laws, which hinder the objective of unearthing and getting black money back. In the first place, it should ask itself as to why a legal frame work be provided to the crooks and thieves to get away.

                It is no secret that no deal worth its name, whether of the land or other property, is complete without a substantial component of the black money. Being the current President of a Cooperative Housing Society, principally meant for the Members of the Parliament, Ministers and Governors, including a former Prime Minister, the selling price for a four-bedroom flat is over 2.20 crore, as any property dealer in Dwarka will tell you. But the sale deeds are registered, not even at 25 per cent of the value, as per the registered deeds submitted to the Society office.

                In my rough estimation, on the conservative side, at least Rs 10,000 crore are generated daily as black money all over the country. The Revenue Department has the power to acquire such undervalued property. But the procedure is so cumbersome and laborious, it has been used in rare cases. So not only this state of affairs leads to the generation of the black money, but also deprives the government of the revenue. Obviously, one factor is the lack of coordination between the sale deed or power of attorney-holders registering authority along with the other wings of the government. Probably, there is more black money in our country than in all tax heavens put together. More than that, though all political parties urge that the black money be brought back, from tax havens, nobody has demanded that government should take steps to end its further generation.

                Nearly 80,000 to 90,000 people travel to Switzerland every year. 25,000 of them very frequently. Clearly they would not be travelling for bona fide tourist purpose, but for some other substantial reasons. The Finance Minister admitted that the government has detected undisclosed income of about Rs 15,000 crore in last 18 month. During the same period, Directorate of International Taxation has collected taxes of Rs 34,601 crore. “The Directorate of Transfer Pricing has detected mispricing of Rs 33,784 crore, which has prevented shifting of an equivalent amount of money outside India.”

                The Supreme Court has said more than once in unequivocal terms that more should be done to repatriate funds illegally parked overseas; that is a national plunder.

                Money stashed abroad is not always the tax evaded money. Drug lords, gun runners, terrorists groups, gangsters all over the world, along with international syndicates also keep their money in safe heavens, where they can lay their hands on it, in times of need for their operational purposes. There is no mechanism with the government to determine and say with cent per cent surety, that the money hoarded abroad is only tax evaded money and not the other crime linked cash. The Revenue Department and other agencies of the government like the RAW, and state trading organisations have their offices abroad. There is no common mandate to them to report any suspicious transactions by the Indians either visiting or staying abroad.

                The stark truth is that the black money is the result of high-level corruption prevailling in our country. The schemes meant for the poor, even as per the government reports, are not implemented and the money siphoned off. Every laws permit every criminal whether in jail or bail can hide their names and crimes and create false alibis. But here the government is creating alibis, for those people whose names have been received as the persons, who are having illegally salted away cash in tax havens. Even apex court says that nothing moves without bribery in India.

                The Finance Minister has said: “The department had the names of account holders in Liechtenstein’s LGT Bank as well as information given by German banks.” Incidentally, there are only 15 banks in Liechtenstein, of which seven are Swiss. The principality, with an area of about 160 sq km, is surrounded by Switzerland and Austria and has a total population of 67,000 people. A good sleuth even on a tourist visa can spot Indians roaming about and visiting 15 banks. The rest of the job of tracing the flight of black money from India, can be done locally, provided the government has the will. So far the government has made excuses, some tenable and some untenable. Unfortunately, no government irrespective of the party in power has made even a pretence of stopping the generation and flight of black money from India, forget about getting the black money back. Thanks to the prodding of the Supreme Court, the government has starting or at least shown motions of acting in retrieving the Indian money stashed abroad. However, it must remember that pretension almost always overdoes the original, and hence exposes itself.

By Joginder Singh

The author is former Director, CBI.

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