Entire black money list out today: Modi Sarkar may have got what it wanted

The Supreme Court, miffed over the fact that the government has disclosed only three names from the famous HSBC Bank list of 700 Indian Swiss bank account holders, has ordered the government to give it the entire list today (29 October). [caption id=“attachment_1776767” align=“alignleft” width=“380”]  Finance minister Arun Jaitley had said that the list will embarrass Congress. AFP[/caption] The government will certainly oblige, for there is little possibility of defying the court. However, one suspects that this is exactly what the government wanted. Remember, Finance Minister Arun Jaitley hinted before disclosing even the three names on Monday – gold trader Pankaj Lodhiya, Goa miner Radha Timblo and Dabur promoter Pradip Burman — that some names may embarrass the Congress. None of the three names have actually embarrassed the Congress so far. In fact, the issue immediately became political and the Congress dared the government to reveal all names. The Aam Aadmi Party added to the cacophony by making holier-than-thou statements. All of them have probably handed the government a covert win of sorts. By playing coy in the initial stages and forcing the Supreme Court to order it to reveal the names, the government has can now claim that its hand was forced by the courts; and, if any of the names now revealed embarrasses any political party, it will say we didn’t do it, the court did. Here’s the point: the 700 names are already with the Supreme Court-appointed Special Investigating Team (SIT) headed by Justice (Retd) MB Shah. If these names are already out of the government’s grasp, clearly the government’s pretence of trying to keep 697 names secret from the court could not but have been an elaborate charade. One need also have no empathy for the 700 names that may, in the process, get revealed. While some may be people with legitimate reasons to hold a Swiss bank account and may now be needlessly embarrassed for being bracketed with crooks holding illegal hoards abroad, the rest deserve to be named and shamed. In any case, chasing even the crooks will be difficult. Remember, the list was stolen from HBSC in 2008; only a fool would still have failed to close his account by 2014. Chances are, beyond the embarrassment, nothing will come of the disclosure. This is why Lodhiya has been saying he does not have a Swiss account. The Supreme Court’s decision today was only to be expected, for it was the same judge, HL Dattu, who had in March excoriated the UPA government for seeking to wind up the SIT set up under the orders of an earlier bench headed by Justice B Sudershan Reddy (since retired). Justice Dattu is now the Chief Justice of India and it would have been foolish to think he would have changed his mind in seven months. In his March order, Justice Dattu had said that it was in the interests of the nation and the economy that “black money lying in foreign banks should be brought back.” The NDA, after taking over, appointed Justice MB Shah to head the SIT, which has already submitted one report in August to the apex court on what it found and did. Its second report is due any time now. The problem, though lies somewhere else. The Supreme Court is clearly wading into executive territory – as it has been doing for some time now in several areas. This is not surprising when the executive manages to paralyse itself into inactivity, as was the case under UPA-2, but surely this is not the case with the Modi government. By getting deeper and deeper into the black money probe and directing action at every stage, the Supreme Court is effectively tying the government’s hands in several areas – including tax treaties with other governments, and the possibility of offering future amnesty schemes to bring back black money. It is not the Supreme Court’s business to start circumscribing the executive’s room for policy action, even though the cause is worthwhile. As I have written before, in his March observations Justice Dattu peddled doubtful economic logic to justify the SIT, which the then Solicitor General, Mohan Parasaran, wanted disbanded: “The feeling of this court is money is lying in foreign bank(s). Per capita income of the country would have gone up had the money been brought back…up to 30 per cent of the tax burden on common man could come down (sic)”. The court is obviously under the wrong impression that black money is lying in some pot somewhere, waiting for it to be discovered by the SIT. Money moves to the place where it yields the highest return. This is true for anonymously held slush money too. Once Indian politicians started raising a fuss about illegal Swiss bank accounts, the money would have moved to safer places. The SIT, even if is able to lay its hands on black money holders, may not be able to lay its hands on the black money itself since it would have moved by now. Black money moves abroad in one of several ways. It is created by underinvoicing exports or overinvoicing imports - with the balance going into a Cayman Islands account, a tax haven, or even to Mauritius with whom we have a tax treaty. This same money could come in as foreign institutional investment (FII) to Indian markets, generate capital gains, and exit as tax-free FII profits. The reason why black money stays abroad is largely economic: the incentives and penalties for remaining in India are weak. If money earns more abroad, or if business is easier to do abroad, money will flow out rather than in. If tax rates are unreasonable or the tax administration is corrupt, all the more reason to keep the money out of Indian jurisdiction. Conversely, when black money is going to be more profitable if invested in India, it will find a way in. The Supreme Court can do zilch about these economic undercurrents, with or without a SIT. But an economic crime is for the government of the day to determine and detect – not the courts. When laws change, the definition of crime itself changes. For example, 15 years ago, it was a crime for Indians to hold foreign exchange when they got back home from trips abroad. Today, it is not – within liberal limits. Earlier, remitting foreign exchange was practically forbidden for any non-business purpose. Today any Indian can invest in a Dubai property legally – within RBI-prescribed limits. Money that would have earlier been considered black will today be called white. The court should also stop peddling theories which say that if black money is brought back, it will reduce tax rates or help the poor. This again is in the domain of elected governments. Money that gets into government coffers does not automatically result in lower taxes or better benefits for the poor. It could go into building infrastructure or offering tax breaks to businesses or even reducing the fiscal deficit. The courts did well to ask the government to disclose the names of Swiss account holders. In doing so, it has probably helped the government avoid embarrassment with foreign governments by disclosing the names of its own volition. But the courts also need to be clear where their jurisdiction stops: with interpreting the law and enforcing it, upto a point. Making the law under the guise of eliminating black money is not its ambit.