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BLACK MONEY WHITEWASH.

Ambushed government scrambles to prove it is recovering slush funds from India as well as tax havens around the world

FACED with allegations that it is not doing enough to unearth black money -- or unaccounted wealth -- the government hurried to show it was moving quickly on this front.

Under pressure from the Opposition to recover thousands of crores of slush funds stashed away in India and in tax havens abroad, and rising public anger on the issue, the union finance ministry is trying to stitch together agreements with 22 tax havens to seek information on unaccounted wealth.

Central Board of Direct Taxes ( CBDT) chairman Sudhir Chandra said that India had already signed the Tax Information Exchange Agreement ( TIEA) with Bermuda and negotiations were in an advanced stage for similar agreements with three other tax havens.

Sources said, once India signs the TIEA with the countries concerned, the CBDT will be in a position to push them to reveal details of bank accounts where slush funds have been parked.

The anxiety to show real intent to unearth black money came as Bharatiya Janata Party ( BJP) president Nitin Gadkari said in Bhubaneswar that the government should make public the names of all those who held Swiss bank accounts. Other political parties have made similar statements. According to government figures, black money involving Indians is estimated to be between ` 34,000 crore and ` 64,000 crore. These are based on the calculations of three government- appointed panels. But, some others say the figure is much higher. The BJP, basing its estimate on a study done by an international watchdog, said black money stood at an astounding ` 21 lakh crore from 1948 to 2008.

A quick calculation shows that even the relatively smaller volumes of slush money, of ` 34,000 crore to ` 64,000 crore, if funnelled into the public kitty, will deliver huge benefits.

For instance, 18 modern super- critical power plants of 700 MW can be set up for about ` 66,000 crore.

Then, going by the 2010- 11 budget, ` 64,000 can fund more than two years' budget allocation for education and health. The allocation for military hardware such as tanks, planes and ships for a year is ` 60,000 crore.

Importantly, a cash pile of over ` 64,000 crore can pay for over 45 days' crude oil import bill for the country.

In the government's scheme of things for recovering slush funds, tax havens such as the British Virgin Islands, Cayman Islands and Gibraltar ( all British territories), Guernsey, the Isle of Man and Jersey ( all British crown dependencies) Netherlands Antilles ( an autonomous part of Holland), Macau ( a special administrative region of China) have been marked as ' specified territories' under the income tax law to enable India to enter into agreements for exchange of information on tax evasion.

This is apart from the Double Taxation ( Avoidance) Treaty ( DTAA) that the UPA government has signed with the Swiss government to get information on the large volumes of cash held Swiss bank accounts.

The treaty will become operational if the Swiss parliament ratifies the legislation.

India has written to 65 nations with whom the government has DTAAs, to revise the existing article on exchange of information to make it more effective and remove the secrecy clause, said a CBDT official.

Bahrain, Seychelles, Congo and Hong Kong Special Administrative Region have also been notified as ' specified territory' for DTAA purposes.

To check money laundering abroad, the income tax department is conducting searches on companies which are indulging in large- scale tax diversions. According to CBDT figures, more than ` 15,000 crore concealed income has been unearthed in the last two years.

One such instance is of ` 507 crore that a steel company had surrendered following an income tax search. A real estate company also surrendered ` 325 crore after it came under the tax scanner.

Despite these steps, the government has not been able to shake off the notion that it has been soft- pedalling on recovering black money -- giving the impression that this is just a whitewash.

Senior lawyer Anil Dewan said in the Supreme Court that the UPA government had not done anything to recover slush funds while the US, France, the UK and Italy had acted against tax evaders after an employee of a Liechtenstein bank sold data on hundreds of accounts holders to tax authorities across the world. The SC is hearing a PIL alleging government failure to bring back dirty money parked abroad.

The petitioners have also questioned the government's motive in seeking information from the LGT Bank of Liechtenstein using the DTAA route which bars the government from going public with the names of black money account holders.

In an earlier hearing in the apex court, Dewan had said that the government chose the DTAA route despite the fact that Germany had offered the information on the bank accounts without any secrecy obligation.

Meanwhile, there are questions on why no punitive action was taken against 18 people who had parked their money in the LGT bank of Liechtenstein. The bank account holders were let off after paying tax on the money stashed in the bank. A CBDT source claimed that its sleuths could not prosecute the account holders for want of evidence.

CBDT submitted an affidavit in the Supreme Court saying 18 Indians had deposited ` 24.26 crore as tax on ` 43.83 crore held in the bank accounts.

Even after drawing up plans to sign agreements with tax havens, will India be able to match the clout of western nations to get the information it wants on tax evaders? For instance, the US was able to squeeze information on American tax dodgers who held 4,450 secret accounts contained $ 18 billion in Switzerland's leading bank, UBS. But, Swiss authorities have been expressing their inability to share information regarding bank deposits on Indians saying it was not necessary for the application of the DTAA between India and the Swiss Confederation but was required only for the enforcement of India's internal laws. They also replied that such information was not at their disposal under Swiss laws in the normal course of tax administration.

With Mail Today Bureau in New Delhi

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Publication:Mail Today (New Delhi, India)
Geographic Code:9INDI
Date:Jan 19, 2011
Words:1046
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