Open Forum
New
Delhi, 29 April 2009
Black
Money Menace
UNEARTH SWISS
ACCOUNT HOLDERS
By Dr. P.
K. Vasudeva
In order to overcome the economic meltdown,
the US
President Barack Obama has launched a campaign to unearth American black money
stashed in Swiss banks. His administration is "committed to taking
aggressive action on offshore tax abuse," testifies Internal Revenue
Service (IRS) Commissioner, Douglas Shulman.
In addition, the Union Bank of Switzerland has
confirmed the figure of 47,000 such accounts as of 30 September 2008 during a
Senate hearing, which explored the fight over secrecy and alleged tax evasion.
UBS has accepted the responsibility of helping Americans hide assets from their
government and turned over the names of about 300 clients. But it is not giving
the IRS names of all the US
citizens who have maintained secret accounts.
Well, if the US is pursuing the unearthing of unauthorised
accounts in Swiss banks, why is India
hesitant to follow suit? Why does it not seek details of its citizens’ personal
account deposits amounting to about $1500 billion? The amount is 13 times bigger
than the country’s foreign debt, and of this about 45 crore poor people could get
Rs 1,00,000 each!
If this mind-boggling amount of
black money comes back to India,
not only the entire foreign debt can be repaid immediately, but the country will
have a surplus of almost 12 times the existing debt. And if this surplus total
is judiciously invested in earning interest, the amount will be more than the
annual budget of the Central Government. Besides, if all taxes are then abolished
the Union Government will still be in a comfortable position.
According to an estimate, about
80,000 people from India
travel to Switzerland
every year. Of these about 25,000 travel very frequently and it is suspected
that they all cannot be tourists. Unfortunately, India tops the list of five
countries, which have unaccounted money illegally stashed in the Swiss banks
amounting to $1456 billion. Russia with $470 billion, the UK with $390 billion, Ukraine
with $100 billion and China
with $96 billion follow suit. A common guess
would be that those who use the Swiss banks would include some of our industrialists,
politicians/bureaucrats, cricketers, film actors, illegal sex traders and
protected wild life operators to name just a few.
Way back in March 2005, the Tax
Justice Network (TJN) published a research finding which demonstrated that
$11.5 trillion of personal wealth was held offshore by rich individuals across
the globe. It was estimated that a large proportion of wealth was managed from
some 70-tax heavens. Augmenting these studies, Raymond Baker in his widely
celebrated book titled Capitalism’s
Achilles Heel: Dirty Money and How to Renew the Free market System
estimates that at least $ 5 trillion have been shifted out of poorer countries
to the West since mid-70s.
Back home, the BJP’s new-found
crusade against money laundering is both relevant and naïve. Whatever the
outcome of the elections, the party shall be remembered as the first to
discover an issue to galvanise opinion not just across caste and community
lines but also globally. Its prime ministerial candidate Advani’s call for
greater action against money stashed in Swiss banks and other tax havens,
theoretically at least, raises the bar of the poll campaign and sets it in tune
with global attempts to collar countries that allow unaccounted money into a
common course of action.
It was at the London G-20 meeting
that both developed and developing countries voiced a collective concern over tax
havens. On its heels came the OECD’s detailed report that ranked 45 such
countries in its response to international pressures for greater transparency.
Ironically, India, along
with other developing countries, had raised the loudest voice at London about joint action
against tax havens but has done pretty little on the front so far.
The idea that a nation’s wealth can
be hoarded at undisclosed places, unfettered by tax laws and used without
accountability seems anathema to most nations. Yet, tax havens such as Swiss
banks have been around for centuries. While some governments have sporadically
and individually chased such money, it is only the current economic crisis that
has focussed attention on the harm that such funds and unaccountable locations
of wealth have inflicted on the world’s financial system.
Unaccounted money has been a source
of worry for India
for as long one remembers. Swiss banks,
though unfairly connote, in middle-class folklore, a store of ill-gotten
wealth. So far, almost every government regardless of its hue has fought the money
laundering industry, huge and myriad, half-heartedly. And so long as the world
prospered, Indian policymakers who tried to curb unaccounted money were derided
for fearing deregulation.
India after all, has suffered
from its pernicious effects in the past and will have to guard against its
potential dangers as it opens up even more. Yet, it is naïve to call it the
“dirty outcome of modern capitalism” alone. India has been a safe and hugely
profitable haven for unaccounted money given the high-value professions and
occupations that still fall outside the taxman’s net. Maybe that’s the best
place to start the battle.
New
Delhi should become an active player in the global crusade
against banking secrecy and tax havens, and pledge to bring back the country’s
wealth from foreign shores and use it for developmental projects. The BJP’s interim
report based on studies conducted abroad, estimates Indian wealth in Swiss bank
accounts and other tax havens to be between $500 billion or about Rs 25 lakh
crore to $1.4 trillion or Rs 70 lakh crore. It also suggests that the issue of
black money is linked to security especially after the National Security Adviser
referred to the stock market boom due to ‘terror funds’.
There are at least 70 tax havens all
over the world. People are concerned with the economy and security, and this
issue of hoarding illegal wealth combines both how the economy should be handled
and how security can be managed. With President Obama planning anti-tax haven
laws, the global climate has become more conducive to tackling such issues and New
Delhi should seize the opportunity.
The German government must be asked to
provide details of the Indian names from the LGT bank secret records it has
accessed from Liechtenstein, a European tax haven. It should also appoint a
special ambassador to work with the G-20 specifically to frame India-friendly
rules to expose secret banking. The task force report also outlined a national
strategy to deal with the issue, including becoming a full-fledged member of
the Financial Action Task Force and using financial intelligence sharing for
security purposes.
Interestingly, unlike the past, the
Swiss government is now willing to furnish details of accounts held by
nationals of a country, provided that government explicitly asks for the
details. While the US and some European governments have already made good the
offer, the UPA government has not moved a finger so far. It is high time it, or whichever new
Government comes into power, to approach the Swiss banks to disclose names of
account holders so as to bring our economy on a sound ground and importantly curb
the disease of corruption afflicting the country.—INFA
(Copyright, India News and Feature
Alliance)
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