Hunting for black money: Modi govt has to end this charade soon

The Modi government, and its predecessor, has merely been playing a charade with the name of account holders in a Swiss bank. It should end it now.

K Yatish Rajawat October 30, 2014 16:21:27 IST
Hunting for black money: Modi govt has to end this charade soon

The Supreme Court's has exercised its executive power forcing the government to submit a list of the names of Indians who have bank accounts in Swiss banks. This is the same list that has been lying with the government for a long time, after being submitted by HSBC, and was considered a state secret.

The official explanation for not disclosing the list was that it would hamper the government's ability to sign a global agreement for tax evasion is well parroted here. The pink newspapers are obviously able to define and explain the reluctance the government had on disclosing the list with a lot of mumbo-jumbo about international tax treaties. The article masquerading as an opinion describes that the government will now be unable to sign the automatic information exchange initiated by OECD, a club of rich countries. The objective behind the automatic information exchange treaty is to end transfer pricing practices that help MNCs avoid taxes.

The mandarins in the Finance Ministry are smart enough to spin this as a reason for not disclosing the list. The first point is that the list has been submitted and not disclosed.The second point is: How does a global treaty for tax evasion by MNCs cover tax evasion by Indian citizens?

The third point is that banks in OECD countries are the biggest losers if India succeeds in bringing back black money, it's a big loss of deposits for these banks.The fourth point is that the biggest beneficiary of automatic information exchange treaty will be developed countries, and not India. Most MNCs have a bulk of their business in developed countries. India has already given up its powers of taxing these countries with multiple Double Tax Avoidance Agreements.

Therefore, the Supreme Court has been given an alibi for not disclosing the list, a very complicated but totally irrelevant one. The Supreme Court also has received other alibis like the issue of privacy and loss of reputation forindividuals who are on the list. If ever there was a list that was a hot potato for the government, and now the Supreme Court, this is the one.

The amount of interest in the list is enormous, especially among the general public. Every man on the street wants to know who the account holders are. This is similar to the Forbes' richest Indian list and given the secrecy over the issue, the interest is more.

If the government and its mandarins did not want to play power games, this list would have been public a long time ago. It is not public because of the power it grants to people who know it. It gives them an opportunity to scare and squeeze the people on the list. Otherwise what prevents the NDA government or UPA-2 from saying that theyhave received a bunch of names from HSBC of account holders in Swiss banks?

These are people who have an account but it does not mean that they have broken a law and the government would only be investigating whether they have paid taxes on the money kept abroad. Transparency sometimes is the best way to avoid a complication in any relationship. But if the objective is to profit from a complication or to use it like a sword of Damocles onthese businessman, then this charade can go on. The UPA-2 is responsible for creating this charade and the NDA has a chance to destroy it and move forward.

There are 700 names and if they are disclosed with proper caveats, which even a amateur lawyer can draft, this charade will be over in a day. The focus and the debate will shift to the more important thing which is can tax be levied on these funds? Because there is no power under the sun which says the government can bring this money back just because it has the information. These account holders will have to be identified as Indians who are liable to pay taxes in India. What happens if all these people have suddenly over the last few years become non-resident Indians and changed their tax status? Neither will the government be able to get this money back nor will it be able to tax this income.

Therefore what this will end up being is a list of people, known to be rich who are not on the Forbes list, but who are getting there. This charade has to end, and the sooner the better.

Yatish Rajawat is a senior journalist based in Delhi, he tweets at @yatishrajawat

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