Home  -  Back Issues  -  The Team  -  Contact Us
     Volume 8 Issue 67 | May 1, 2009 |

  Cover Story
  Current Affairs
  Photo Feature
  Straight Talk
  In Retrospect
  Star Diary
  Book Review
  Write to Mita
  Post Script

   SWM Home


Minting Money

Black money stashed away in foreign tax havens has become a major issue in the ongoing parliamentary election campaign in India

Coomi Kapoor

The two principal parties are engaged in a bitter duel not only over the actual amount of illicit funds held by Indians in secret Swiss accounts but also the modalities of getting it back into the country. The call by the Leader of the Opposition, L.K. Advani, for bringing back the mountain of illegal funds reportedly over US$5 trillion (RM17.97 trillion) seems to have forced the outgoing ruling Congress Party on the back foot. The opposition National Democratic Alliance's prime ministerial candidate set the ball rolling by publicly calling on Prime Minister Manmohan Singh on the eve of his departure early this month for London for the G-20 Summit meeting to take up the issue of black money with his counterparts.

A few days later, Advani's Bharatiya Janata Party (BJP) prominently included the repatriation of black money in its election manifesto. The party criticised the Congress for not being serious in bringing back the loot. Seeking to make light of the BJP demand, the Congress spokesmen pooh-poohed Advani, saying that he had vastly exaggerated the extent of black money held by Indians in tax havens.

Also, they asserted that the G-20 Summit was not the right forum to raise the issue of black money. A Congress leader, Jairam Ramesh, in a letter to Advani asked him what he had done to make secret accounts transparent when he was the country's home minister for six years.

Union Finance Minister P. Chidam-baram accused the opposition leader of alerting the holders of secret funds by raking up the issue of black money.

His colleague and Minister for Science and Technology, Kapil Sibal, while dismissing the opposition demand as an election gimmick, charged the previous BJP-led National Democratic Alliance government of easing the rigours of holding secret funds abroad by replacing the Foreign Exchange Regulation Act with the Foreign Exchange Management Act. But, clearly, the Congress Party had not done its homework.

The debate over black money was effectively lost by the Congress Party when Arun Shourie, the former journalist turned politician came up with a reasoned rebuttal, setting out detailed and pointed answers to all the questions raised by the Congress leaders.

Shourie, a member of the Rajya Sabha (Upper House of Parliament), demolished the Congress case on the timing of the demand, the NDA record in the matter while it was in power, and about the amount of black money stashed away abroad in secret accounts. On the timing, Shourie revealed how in April last year Advani had written to then Finance Minister P. Chidambaram to try and get the names from the German government of Indians figuring in LGT Bank in the tax haven of Liechtenstien.

The Germans had laid their hands on a compact disc containing the names of secret account-holders; they had proceeded against their own nationals and were willing to furnish the names to the respective governments of their nationals maintaining illicit accounts in LGT Bank.

But, to Shourie, it appeared that the Indian government “intended to do little except go through the pretence of taking some steps … the finance ministry wrote to the Indian ambassador in Germany not to press the Germans for release of the names of Indians lest the Germans take offence.” On the appropriateness of the G-20 as a forum for dealing with the global menace of tax havens, Shourie quoted from the communiqué issued at the end of the summit meet.

It said: “We pledge to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems.” Shourie pointed out how the Organisation for Economic Coopera-tion and Development had formulated transparency rules which were later approved by the G-20 in 2004 and by the UN Committee of Experts on International Cooperation on Tax Matters in 2008.

Indeed, the American government had forced the biggest Swiss bank, UBS, to disclose the names of its citizens holding secret accounts with it. The bank had also agreed to pay a fine of US$780mil to the US for breach of its banking laws, since some of the secret accounts were being operated through its branch in New York. As to the estimate of black money stashed away in tax havens by Indians, a report of the Global Financial Integrity of the Washington-based Centre for International Policy had estimated the outflow from India during 2002-06 at US$137.5bil.

Meanwhile, a group of prominent citizens filed a Public Interest Litigation in the Supreme Court seeking a direction to the government to try to get back the stolen funds from tax havens. The two-member bench headed by Chief Justice K.G. Balakrishnan was told by a senior law officer of the government that the long-awaited information about Indians holding accounts in the Liechtenstein bank had at last been received from the German authorities, and could be placed before the court at the next hearing.

Why the government had refrained from disclosing this vital development further added to the curiosity about the identity of secret stashers of black money in LGT Bank, Liechtenstein. Following the global financial crisis and the ongoing campaign against terrorist groups, world opinion is veering against tax havens. The legendary privacy of the Swiss banking institutions is about to be pierced.


Copyright (R) thedailystar.net 2009