InfoAnda - COMMENTARY: Bringing back billions in 'black money'

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Yahoo! My Yahoo! Mail More Yahoo! Services Account Options New User? Sign Up Sign In Help Yahoo! Search web search Home Singapore Asia Pacific World Business Entertainment Sports Technology Weekend Edition Australia China India Indonesia Japan Malaysia Philippines Thailand Vietnam COMMENTARY: Bringing back billions in 'black money' ANN - 2 hours 36 minutes ago Send IM Story Print New Delhi (The Star/ANN) - Black money has become a big headache for the Indian government. The Opposition accuses it of not doing enough to bring back hundreds of billions of dollars stashed away in secret bank accounts abroad. The Supreme Court is hearing a Public Interest Litigation (PIL) which seeks to pin down the Government on the repatriation of black money. As a beleaguered government pleads patience, critics blame it for being soft towards the generators and hiders of black money. Admittedly, even the Government does not deny that wealthy Indians might be hiding a huge cache of unaccounted funds in various tax havens abroad, especially in Switzerland. The issue first came into public focus at the time of the last general election. The opposition Bharatiya Janta Party (BJP) accused the United Progressive Alliance (UPA) Government of dragging its feet on the matter even though a number of foreign governments had adopted an aggressive stance to penalise tax offenders illegally keeping funds in secret banks abroad. The immediate trigger in the run-up to the May 2009 parliamentary poll was provided by news reports that the German Government had paid a former employee of the Liechtenstein Global Trust for information regarding its citizens' illegal accounts. The compact disc bought by the Germans also contained names of a number of Indians holding accounts in the said bank. The BJP prime ministerial candidate, L.K. Advani, claimed that the UPA Government had made no effort to secure the names of Indians from the German authorities even though the latter were willing to part with the required information. In spite a shrill Opposition campaign to "name and shame" the tax-offenders, the Government refused to make the list public. Meanwhile, a PIL filed by the legal luminary Ram Jethmalani, who is also a BJP MP to boot, forced the Government to take a clear-cut stand. The Supreme Court demanded a categorical assurance that the Government was doing all in its power to, as the presiding judge put it, " stop the plunder of the country." The court overruled the objection that the names of those holding illegal accounts in the Liechtenstein bank could not be made public. It asked the Government to furnish it the said names in a sealed cover. At the resumed hearing of the PIL on Thursday, the SC bench again posed searching questions. Presiding Judge Sudarshan Reddy, inter alia, asked the Government counsel: " What is the source of black funds stashed away abroad in secret accounts? Is it commissions in arms deals, drug peddling, or smuggling?..." On the same day, a BJP spokesman accused the Government of misusing the double taxation treaty to shield "criminal and corrupt elements holding black money in foreign banks." Apparently, there are a mere 26 Indians on the list furnished to the Supreme Court. The sum involved is said to be relatively a tiny fraction of the total black money stashed abroad by Indians. Yet, once the principle is established, and the lid taken off the secret accounts in the Liechtenstein bank, it could pave the way for the big fish hiding tonnes of ill-gotten wealth in Swiss and other tax havens to be 'named and shamed.' Critics alleged that the Manmohan Singh Government was dragging its feet because a number of senior leaders of the Congress Party had allegedly stashed away millions in secret Swiss accounts. Indeed, Jethmalani alleged that a leading political dynasty of India kept billions in numbered Swiss accounts. Surprisingly, experts believe that the illegal flight of funds to foreign tax havens gained further momentum after the liberalisation of the economy in the early 90s and the lifting of strict controls on foreign exchange transactions. Frankly, there were several incentives for black money generation during the pre-liberalisation period, the chief among them being the expropriatory tax rates. At one time in the mid-70s, the peak rate of taxation was over 100% -- 103% to be precise since a 10% surcharge and a 3% educational-cess was levied on the highest income tax rate of 97.5% on an income of Rupees one million and above. Since then the tax rates had become reasonable. At the highest slab of 33% , the income tax rate is lower than that prevailing in a number of developed countries. Yet, this has not stopped the generation of black money and its flight abroad. In the pre-liberalisation era when foreign exchange was scarce, one method of stashing black money abroad was to under-invoice imports and grossly over-invoice exports. Another was to avoid excise duty and other levies on manufactured goods and to repatriate slush funds through underhand or -- hawala -- channels abroad. Corruption was so endemic even politicians and senior bureaucrats came to be paid bribes in secret bank accounts in tax havens. Now, thanks to an alert media and a few public spirited lawyers, the issue of black money has come to the fore. There was renewed focus on black money following a claim by a former employee of a Swiss bank that he had given details of 2,000 high net-worth accounts to Julian Assange, the founder of the WikiLeaks. It immediately set off speculation about the Indians figuring in that list. The Opposition leaders were fairly certain that leading lights of the ruling Congress Party would be exposed should the list of Indian names become public. But this was only one of the smaller Swiss banks. There were much bigger banks in Switzerland and in a few other tax havens where Indians have stashed away their illicit billions. 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