Posts Tagged 'indian money'

Getting India’s money back from Tax Havens Congress caught in its own web

Getting India’s money back from Tax Havens Congress caught in its own web

– Dr. Arun Shourie

Stupefied by the strong endorsement all across the country of the demand that the money looted from India must be brought back, the Congress has tied itself in knots. Its spokesmen – led, as will be clear from the arguments they have advanced, by four lawyers – have given five reactions:

Why is Mr. Advani taking up this matter now, on the eve of elections?

The GE-20 meeting was not the proper forum for taking up the issue.

There is doubt about the figures.

Why did the BJP government to replace FERA by FEMA, and thereby make the offences compoundable?

Is Mr. Advani not unwittingly alerting those with illegal money abroad to spirit it away from Switzerland to other tax havens?

What was the NDA doing when it was in office? In any case there is doubt about the figures.

The reactions betray panic as even the littlest reflection would have shown the “arguments” to be indefensible. Let us consider them one by one.

Why is Mr. Advani taking up this matter now, on the eve of elections?

The fact, of course, is that Mr. Advani took up the matter with the Prime Minister in April last year. He wrote to Dr. Manmohan Singh soon after it became known that the Government of Germany had succeeded in obtaining names of persons who had stashed money in the LGT Bank in Lichtenstein. The reply that P. Chidambram, the then Finance Minister, sent him showed that the Government intended to do little except keep going through the pretence of taking some steps. Soon thereafter, we were alarmed to learn that a senior official of the Finance Ministry had written to the then Indian Ambassador in Germany not to press the Germans for release of the names of Indians in the list that they had obtained from Lichtenstein — lest the Germans take offence and conclude that they were being pressurized and their bona fides were being questioned! [This information was later confirmed by report filed by Amitabh Ranjan in The Indian Express of 31 March 2009.] Subsequently, we took up the matter in Parliament also. And yet the evasion, “Why now?”

The GE-20 meeting was not the proper forum for taking up the issue.

This customarily self-serving rationalization was put out by one of the Congress party’s lawyers and spokesmen. At this very time the party was trying to insinuate that, actually speaking, the Prime Minister had taken up the matter at the G-20 Summit. As its spokesmen could not point to any statement he made either at the Summit itself or even at the press meet the PM had held after the Summit, they drew solace from a passing reference to the matter in the speech he had made at the dinner hosted by Gordon Brown.

In any case, if the G-20 Summit was not the right forum for taking up this matter, how is it that in the communiqué that the G-20 leaders issued on 2 April 2009, in paragraph 15, entitled, “Strengthening the Financial System,” they pledged themselves “to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information”?

Were they also, in the view of the Congress party, acting inappropriately when they made such a strong commitment in their communiqué at the Summit?

And recall that no sooner had they issued the threat of imposing sanctions that countries which had been black-listed by the OECD that very day began declaring that they would indeed sign up on the agreement to exchange tax information, and that includes evasion.

In any case, there is doubt about the figures.

As is its custom, the Congress is trying to cover up the basic question of the money which has been looted from India and is lying in tax havens, by raising questions about the precision of figures and estimates. This is exactly the kind of legalisms with which persons like Mr P. Chidambaram and other legitimizers were fielded to cover up the loot from Bofors. In its paper, “Overview of the OECD’s Work on International Tax Evasion,” the OECD itself lists studies that state that there are $1.7 trillion to $11.5 trillion which are today parked in tax havens. This paper of the OECD has been widely reported in the Indian press. The basic point is: even if the amounts are just a few scores of billion dollars and not one and a half trillion dollars, why should they not be brought back to India? And the fact is that other countries, much smaller countries with none of the pretensions of being a “super power, have succeeded in getting their money back. Even as of October last year, when the OECD released its paper, little Ireland had succeeded in recovering almost a billion Euros through an investigation into offshore banks.

Given that even small countries like Ireland have got money back, is it not a shame, is it not an outrage that, as of yesterday, 18 April, 2009, The Times of India, should be quoting the Swiss Ambassador to India as stating on record that till now, the Swiss Government has received no request – not even a request – from the Indian Government?

The real question is different: can the money looted from India be brought back to the country when the attitude of the government continues to be as determinedly inactive as that of the present Government?

Can the Government which allowed Ottavio Quattrochi to take his money out of banks – where it was lying frozen on court orders – be trusted to bring back the loot that is lying in Swiss banks and other tax havens? Can the Government which prostituted the CBI so that he may get away from Argentina be trusted to bring the loot back?

Why did the BJP government to replace FERA by FEMA, and thereby make the offences compoundable?

Again, the Congress is relying on the short memory of its audience. The fact of the matter is that no one had been pressing more for the replacement of the harsh provisions of FERA than the Congress itself. The changes were being contemplated since 1996. The demand for doing away with the harsh provisions came to a crescendo during the Government of Mr. VP Singh when FERA came to be used for interrogating captains of industry – like Mr. S.L. Kirloskar – under harsh circumstances. As news reports of that period themselves indicate, FEMA which was approved by the Government in July 1998, was on the lines of a draft which had been prepared under the leadership of the preceding finance minister, Mr P. Chidambaram. Even today, you can go to the website of Rediff-on-the-net, go to their dispatch of 25 July, 1998, on “FEMA, Money Bills: Cabinet nods, Parliament’s turn next,” and you will read, “The Bills were broadly on the lines of a draft prepared under the leadership of then Finance Minister Palaniappan Chidambram.”

In any event, there is no mystery about the reasons on account of which the law was changed. They are well set out in the following passage:

“Until recently, we had a law known as the Foreign Exchange (Regulation) Act. Its object was to conserve and augment the forex reserves of the country. The way to hell, it is said, is paved with good intentions. Like many well-intentioned laws, FERA paved the way to disaster. FERA created a flourishing black market in foreign exchange. It brought into the economic lexicon the word ‘Hawala’. Illegal forex transactions became the fuel for the growth of crime syndicates with trans-border connections.

“FERA also became a tool of oppression. Successive governments persisted with FERA and added COFFEPOSA and SAFEMA. International markets do not respect draconian laws that run counter to common sense. India’s reserves, far from being augmented, dwindled at an alarming rate… Mercifully, FERA was buried finally on May 31, 2000.”

When and where was this written? In an article that appeared The Indian Express on 25 August 2002. Who wrote the article? None other than P. Chidambaram!

Is Mr Advani not unwittingly alerting those with illegal money abroad to spirit it away from Switzerland to other tax havens?

Another clever little statement by yet another clever lawyer of the Congress party! Would the looters who have stashed away money in tax havens from India still need to be alerted after Germany got the names from Lichtenstein as long ago as last year? Would they still need to be alerted after Germany offered to furnish the names to governments that asked for the names? Would they still need to be alerted after the United States got the names from the leading bank of Switzerland, UBS in February this year, and got it to submit to paying a fine of $ 800 million to boot? Would they still need to be alerted after the G-20 leaders, including Dr. Man Mohan Singh as the Congress would like to remind us, declared their determination to get the tax havens to disgorge the names? But such is the confusion in the Congress party and such the brilliance of its lawyers that all it can do is to seek to deflect the nation-wide demand for getting the loot back from tax havens by such witticisms!

What was the NDA doing when it was in office? In any case there is doubt about the figures.

Leaders of the Congress party would be better advised to ask, “During that very period, what was the Congress party doing, what were its lawyers and leaders doing, to thwart the efforts of the NDA Government to uncover the names of persons who had looted the country even on defence deals like Bofors?” But even if the NDA had done nothing – whether on terrorism or money abroad – is that any reason for not hurrying to avail of the unique opportunity that has arisen now?

Even while replacing FERA by FEMA, the NDA Government made sure that it would have an additional two years to file prosecutions under FERA. And it filed as many as 2000 cases against those who were under investigation before FERA lapsed. The reason for doing so, a reason that is well known to lawyers in the Congress party, was that, when a prosecution is filed it is adjudicated according to the law which prevailed at the time at which the case was filed. These are the very cases which the Congress later on did not pursue.

The fact of the matter is that it is now that the unique opportunity has arisen to get the loot back: Germany has succeeded in getting the names; the US has succeeded in getting the names; the G-20 leaders have pledged themselves to ensure the end of bank secrecy; countries that had hitherto refused to share the requisite information are pledging to do so – within a week of their names being published by OECD in the list of countries that were dragging their feet on the question, Costa Rica, Malaysia, Philippines and Uruguay pledged to enter into the relevant agreements.

Conclusion

There is a real fight ahead: a fight in the national interest, a fight that will have to be waged doggedly to get the names from the tax havens and to get the amounts back to India – as tax havens will not easily part with their route to lucre. And not all countries will be eager to wage the fight – so many rulers in Africa, in Latin America, to say nothing of the prince lings of China – will be loath to see the fight succeed. So, determination and leadership will be required of India, and persistence, and forging alliances with civil society in Europe and elsewhere.

Nor are bilateral agreements any substitute to multilateral pressure. With close to seventy tax havens, decades will pass before agreements are concluded with each haven, even as money is spirited from the haven that has signed up to the one that is holding out.

As has been correctly emphasized, a consensus is already emerging across the country. Leaders outside the political realm, parties such as the CPI(M), SP, BSP, JD(U), AIADMK have all demanded that the Government act energetically to get the names from the tax havens and to get back the amounts. Instead of quibbling, the Congress would be well-advised to endorse the consensus, and act on it. Not joining secular forces on even so secular an issue?!

Advani on Swiss bank Money from India

‘UPA has adopted a policy of deafening silence and inaction’

March 29, 2009 | 16:08 IST
At a press conference in New Delhi on Sunday, Senior Bharatiya Janata Party leader and the National Democratic Alliance’s prime ministerial candidate L K Advani questioned the United Progressive Alliance’s ‘deafening silence about Indian wealth’, estimated at between Rs. 25 lakh and Rs 70 lakh crore, hoarded in secret Swiss bank accounts.
Advani claimed that the money was a mix of ‘political bribes, crime money and venal business’.
This is the full text of his speech:
Prime Minister Dr. Manmohan Singh is going to attend the G-20 summit in London on April 2. Ahead of this meeting, I wish to bring a highly important matter to the attention of the people of India.
It is well known that Swiss banks provide secrecy and safety for tax evaders, corrupt individuals and criminals of various nationalities to hoard their monies. Several offshore tax havens are also used for murky financial dealings. The extent of illicit money lodged in Swiss banks is mind-boggling. Estimates vary.
According to Wikipedia, they totaled $ 2.6 trillions (Rs. 130 lakh crores in today’s exchange rate) in 2001. In 2007, they were believed to be about $5.7 trillions (Rs. 285 lakh crore), a staggering 80% increase in six years.
It is equally well known that many wealthy Indians have deposited their illicit monies in secret Swiss bank accounts and tax havens elsewhere around the world. As per credible estimates, these amounts range between $500 billion (Rs. 25,00,000 crore) and $1400 billion (Rs. 70,00,000 crore).
So long as the West-dominated world economy was doing well for the western countries, their governments winked at the secretive functioning of Swiss banks and tax havens. However, the current global economic crisis, which put several of their important financial institutions on the verge of collapse, has forced them to take many unconventional steps to revive their ailing economies.
The leaders of France, Germany, UK and other countries have joined forces with the US President Barack Obama in the battle against tax havens. They are mounting pressure on Switzerland and offshore tax havens to put an end to banking secrecy to bring back their tax-evading citizens’ hidden wealth.
This is likely to be an important point on the agenda of the G-20 Summit in London. In February, UBS, the largest Swiss bank, was forced by the US tax authorities to reveal the names of some 300 presumed tax evaders. The US threatened to sue the UBS. Fearing that this could lead to the demise of the bank, the Swiss authorities invoked an emergency clause in their banking law and gave the data to the US. Soon thereafter the Obama administration announced a law to uncover illicit American money in all secretive tax havens, including the Switzerland.

UPA government’s evasive reply to my earlier demand
It is baffling that, in the face of this growing governmental activism in the West, the UPA Government has adopted a policy of deafening silence and inaction. It has taken no steps whatsoever to get information about illicit money kept abroad by Indian nationals and to strive to get it back.
Last year, I had written a letter to Prime Minister Dr. Manmohan Singh about the need to get the names of Indians, presumed to have secret accounts in LGT Bank in Liechtenstein in Germany. I was disappointed to see that the reply I received from the then Union Finance Minister was evasive. (Copies of both letters attached.)
Commenting on India’s ambivalence, Transparency International (TI) said that India has maintained “a stoic silence over the issue and has not approached the German government for this data” (The Economic Times, 25.5.2008). Some ministers in the UPA Government are reported to have made several trips to Switzerland as the personal leg of their official tours abroad.
Considering the size of the Indian wealth hoarded abroad, the government is duty-bound to take proactive steps to bring it back. The amount involved constitutes 3-10 times India’s overseas debt, and 50-120% of India’s GDP. Even if we take the lower limit of the estimated amount of Rs. 25 lakh crore, the money is sufficient to:
Relieve the debts of all farmers and landlessÂ
Build world-class roads all over the country  from national and state highways to district and rural roads;
Completely eliminate the acute power shortage in the country and also to bring electricity to every unlit rural home;
Provide safe and adequate drinking water in all villages and towns in India
Construct good-quality houses, each worth Rs. 2.5 lakh, for 10 crore families;
Provide Rs. 4 crore to each of the nearly 6 lakh villages; the money can be used to build, in every single village, a school with internet-enabled education, a primary health centre with telemedicine facility, a veterinary clinic, a playground with gymnasium, and much more.
What a transformation it can make to the ordinary and poor Indian lives!
Financial RDX with terror links
The need to put an end to hoarding of Indian wealth abroad, and to bring back the wealth already hoarded, is all the greater since the illicit money seems to be a mix of political bribes, crime money and venal business. The money trail in the Bofors scam in the 1980s had revealed the involvement of secret Swiss bank accounts. Last year, when the stock market was booming, National Security Advisor Shri M.K. Narayanan publicly stated that terror money might be operating through fund flows. What he had in mind was the Participatory Note [PN] mechanism for investment of undisclosed funds from abroad in Indian stock markets. The PN mechanism was introduced when India was desperately in need of forex inflow. The UPA government has permitted this mode of investment even after it had grown to alarming proportions. More recently, a hawala operator from Pune was found by the Income Tax department to have unaccounted wealth valued at Rs 35,000 crore. He is also suspected to have secret bank accounts abroad.
The BJP sees in secret banking the RDX that has the potential not only to blow up national financial systems but also to support and fund global terror networks whose attacks on India increased during the UPA regime. We do not expect any action from the UPA Government, which has shown total disinclination to act in this matter. In any case, its days are numbered.
If the people of India elect a BJP-led NDA Government in May 2009, we assure the nation that India will join the global effort to put an end to banking secrecy and intensify it by every means  diplomatic, political and economic � to get back the real Sovereign Wealth of our country. The BJP will intensely and actively educate the public opinion on this issue and take it to the masses and create intense public pressure on the system to uncover this nexus between secret foreign money, terror, and politics.
BJP’s promise and plan of action
1. The Bharatiya Janata Party will conduct mass public opinion polls on April 6, 2009, Foundation Day of the BJP, on Indian money in secret accounts abroad.
2. The Chief Ministers of the BJP-ruled States will write to the Prime Minister urging him to write to the Swiss and other authorities to disclose the names of hoarders of Indian monies abroad, since it is a huge loss to the state exchequer.
3. The BJP will form a Task Force comprising experts in law, accounting, management and intelligence to prepare a strategic document for India to recommend ways to get back the national wealth stashed away illegally by the corrupt politicians, venal businessmen and criminal overlords. Shri S. Gurumurthy, well-known chartered accountant and writer specializing in investigative journalism; Dr. R. Vaidyanathan, Professor of Finance at the Indian Institute of Management, Bangalore; Shri Mahesh Jethmalani, a renowned lawyer; and Shri Ajit Doval, an acclaimed national security expert, have agreed to work voluntarily on this Task Force.
Courtesy:Â http://www.lkadvani .in