Mr FM, can taxman do quiet deals with Swiss a/c holders?
A business newspaper has reported that 17 Swiss account holders have quietly disclosed their evasions and paid up taxes. Is a clandestine VDS on?
Is the government of India running an undeclared voluntary disclosure scheme (VDS) for India's Swiss bank account-holders without formally announcing one?
The Economic Times seems to be suggesting that one such scheme is already underway, but clandestinely. According to the newspaper, the income-tax department in Mumbai has already "secured 17 voluntary disclosures out of the 700 Indians having secret accounts with HSBC Bank, Switzerland."
The HSBC list came from a former bank employee who stole the data in 2008 and passed them on to the French government. The French government then decided to share the details of Indian account holders with our own government. But the latter has been acting cagey about disclosing the names to the public.
Lists of Indians with accounts in Liechtenstein and other tax-haven banks have been circulating in the Indian media in recent months, but so far there has been no official confirmation on the action taken against them. (Read more on this here)
The identities of the 17 people who made voluntary disclosures to the Mumbai tax department are not known. But Rudolf Elmer, a whistleblower who ran off with data from Swiss banks and passed some of the information to Wikileaks, told Headlines Today some time ago that Indians names included "politicians, cricket players, managers, and film stars." BJP member of Parliament Varun Gandhi has filed an RTI to seek those names.
However, if The Economic Times story is true - there is no guarantee of it since the sources quoted are unnamed - it means that the taxmen are privately closing these cases by letting the Swiss account holders pay their dues on the quiet. It is also not clear whether any penal taxes are being levied on these account holders.
The unnamed source is quoted as saying: "If someone agrees to pay tax, there will be very little action against him. Otherwise, the department may not only use its powers, but also involve the Enforcement Directorate. Then, the party may face charges relating to violation of foreign exchange regulations and money laundering,"
However, this clandestine effort to collect taxes is not without its hazards. Three reasons why.
One, there is the question of legality. When the holding of undeclared foreign currency accounts is a crime, how can the tax department deal with it as if it was something normal?
Two, since the Swiss bank list is available both to our politicians and the tax department, what is the possibility that this power will not be used to blackmail people and collect bribes?
Three, when black money is such a big issue politically and geopolitically, can the Mumbai tax department just do quiet deals with tax evaders?
The scope for abuse is enormous. It is doubtful whether the tax department can do this kind of thing on the sly, especially given the context of the current political debate on funny money in tax havens.
If the government wants to give tax evaders an amnesty due to weak revenue growth, it should have the courage to do so.
If, on the other hand, it plans to disclose their names to the country some time in the near future once its investigations are complete, it should not allow the tax department to do its own deals with Swiss bank account holders,
Pranab-da, does this action of the tax department have your sanction?
An amnesty offer is being made to 100 wealthy Indians on a list of 700 citizens with HSBC accounts in Geneva that French authorities gave to the Indian government last year.
Western tax authorities have individually stepped up efforts to net more money hidden abroad by their own citizens through a series of amnesties targeting people with accounts in jurisdictions such as Switzerland and Liechtenstein.
Given the difficult budgetary situation, the Modi government should announce a mother-of-all black money amnesty schemes to bring money out of tax havens abroad and also from domestic sources.