Yet another big global leak of confidential papers exposing rampant tax evasion and hardly any really big names from India—isn’t it strange? And, yet, India ranks a high 19, out of 180 countries, in terms of the number of people named in the documents. The Paradise papers, a leak of 13.4 million confidential documents pertaining to clients of two law firms—Appleby, based in Bermuda and Asiaciti of Singapore—were released by the International Consortium of Investigative Journalists (ICIJ) earlier this month. The leaked documents, allegedly, reveal tax evasion by rich and powerful individuals and companies across the world through artificial entities registered in 19 tax havens.
The Indian government was extremely swift in announcing a multi-disciplinary committee last year to investigate the Panama papers (a similar leak in 2016 of 11.5 million files from the Panama-based law firm of Mossack Fonseca & Co which included the names of several leading politicians around the world but nothing of great significance from India). It has, once again, been quick in announcing the reconstitution of this committee, in response to Paradise papers. The committee comprises officials of the Reserve Bank of India (RBI), central board of direct taxes, enforcement directorate and the financial intelligence unit of the finance ministry. But, having offshore accounts is not, in itself, a crime; the government permits setting up of overseas bodies for bonafide business activities and Indians are also allowed to invest as much as $250,000 overseas.
Moreover, although the Paradise papers threw up 714 Indian names (only a few have been released so far), all Indian-sounding names needn’t be Indian citizens. For instance, corporate lobbyist Niira Radia, whose companies figure in what are now called the Paradise papers, is a British citizen. Ms Radia made headlines for the leaks of her taped conversation lobbying for ministerial portfolios, pushing policy changes and influencing media on behalf of her clients—Mukesh Ambani and Ratan Tata.
The Indian names, published so far, include those of the Sun group founded by NL Khemka (according to The Indian Express, it has 118 offshore entities and is the second largest client of Appleby), which is likely to face detailed scrutiny. There is the flamboyant Vijay Mallya, whose troubles continue to mount. The Indian Express alleges that Vijay Mallya diverted over $1.5 billion through four offshore subsidiaries of United Spirits Limited (USL), India as loans. When Diageo acquired control of USL for Rs1,225 crore, these funds, shown as debts were waived. In effect, the Appleby documents indicate that Diageo paid over Rs10,000 crore to Mr Mallya which has been hidden from the Indian shareholders, regulators and tax authorities. This is bound to come up, with Mr Mallya’s extradition hearings in the United Kingdom begin shortly.
Superstar Amitabh Bachchan figures again in the Paradise papers (he and daughter-in-law Aishwarya Rai figured in the Panama papers too); but, since he has chosen to remain silent, it is not clear if any wrongdoing would eventually be established. Similarly, what is reported so far, about several political figures, including Jayant Sinha, Manyata Sanjay Dutt (wife of actor Sanjay Dutt), or BJP member of Parliament Ravindra Kishore Singh, appears so tiny that the investments could easily be done under the limits permitted by the government for individuals. The Indian Express reports that Dr Ashok Seth, chairman of Fortis-Escorts and Padma Bhushan awardee, had shares in a Singapore-based company whose stents he prescribes to patients. He has, since, sold the shares. An investigation by the committee would reveal whether there is any financial impropriety, although it raises issues about moral propriety. Entities being investigated in what is known as the Rajasthan ambulance scam, including politically exposed persons (PEPs) figure in the Appleby papers. The documents ought to provide additional ballast to the probe.
Unfortunately, none of this adds up to huge revelations about laundered money. We have all seen the stupendous increase in wealth flaunted by politicians across the spectrum without any visible means of income to justify their lifestyle and spending. Even Subrata Roy, Amitabh Bachchan’s s former buddy, still has plenty of money to splash on advertisements, hoardings and hiring stadiums for public meetings in 18 cities, despite spending two years in jail for failing to make bail payments in accordance with a Supreme Court order.
Remember, India is apparently hard at work trying to track down black money since 2008, when we (albeit reluctantly) obtained information from Germany on those who had accounts with LGT, a Liechtenstein bank. There were three other lists of money stashed overseas even before the Panama and Paradise leaks. There was a list of 700-odd names from data stolen from HSBC’s Geneva branch that was handed over by the French government; two other lists of stolen data were available from Denmark and Finland.
Although these were non-serious efforts under the previous government, the NDA (National Democratic Alliance) has shown greater determination. A new Black Money Act was passed in 2015; a voluntary disclosure with very steep penalties coincided with the harsh demonetisation of currency that threw the country in turmoil; none of these has led to any significant revelations. The multi-disciplinary group (MDG) probing black money stashed overseas has already submitted five reports to the Supreme Court appointed special investigation team (SIT) headed by two former judges of the apex court. The SIT, in turn, has submitted a sealed cover report to the Supreme Court.
Further, the income-tax (I-T) department, on inquiring into 426 names revealed by the Panama papers, had found that only 147 are actually actionable and its investigation has led to the disclosure of Rs792 crore so far. The I-T department has already launched criminal prosecution in five cases and conducted searches, or issued notices, in several others. Amang these is Vijay Choudhary, promoter of Zoom Developers, one of the biggest bank defaulters (which owes nearly Rs3,000 crore), was arrested by the enforcement directorate in May this year under the Prevention of Money Laundering Act (PMLA).
And, yet, none of this adds up to the big war on black money that one expects. The numbers cited, over the years, are mind-boggling. A Hindustan Times report in November 2016 said, “Goods and services worth at least Rs17 trillion were exported by Indians over the past four decades but did not remit an equivalent amount in foreign exchange.” This money was probably siphoned abroad through phoney export deals or under- and over-invoicing of goods. Other, more modest estimates of black money have ranged from $181 billion to $1.8 trillion, according to Prof R Vaidyanathan’s book Black Money and Tax Havens. A 2014 study by the Associated Chambers of Commerce and Industry had estimated black money stashed abroad at $2 trillion.
The Panama or Paradise papers are a step forward, but still not the bombshell one has been led to expect. So what is the way forward? Dr Subramanian Swamy, member of parliament, has outlined four ways, in an article in The Hindu. First, use the Swiss government’s cooperation to confiscate money held in Swiss bank accounts by using Switzerland’s Law on International Judicial Assistance in Criminal Matters. Secondly, follow the French or German method of using ‘inducements’ to secure leaks of information from specific banks and act on it. Unfortunately, India has not done much even when these governments offered specific information. Third, use the US method of arresting and accusing Swiss bankers of espionage and forcing the government to hand over information about Americans holding illegal Swiss bank accounts. The fourth suggestion, says Dr Swamy, was made by the jurist Fali S Nariman; it was to invoke a resolution of the UN Convention against Corruption and to pass a law to nationalise all bank accounts of Indian citizens in the 90-odd nations where black money is stashed. Next, get possession of the money through bilateral negotiations with each of these countries.
The Modi government is high on rhetoric about black money, but will it dare to experiment with these bolder suggestions to get real results?
Follow Dr Swamy's advise or better make him in charge to track it down.He will do a very good job with his enthusiasm and drive.
I do not know why Government is still not able to bring the big crooks to book..Maybe Go Slow to protect buddies?
on advise given by Shri Subramanim swamy.
Not sure if you already know about it or working on something better.
http://www.moneycontrol.com/news/business/economy/indias-farms-report-income-greater-than-our-gdp-target-them-in-the-war-on-black-money-2437801.html
Why dont you do a much better detailed analysis and exposure of the same.
It will also be a good idea if you can name the top 2500 so called "agricultural" farmers with income more than 8 times Bharats GDP.
I guess Supriya Sule must be one of them.