SPECIAL Getting Indias Money Back from Tax Havens: Congress caught in
its own Web 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
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 not unwittingly alerting those with
illegal money abroad to spirit it away from Switzerland to other tax havens? What
was 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 taking up this matter now,
on the eve of elections? The fact, of course, is that took up the matter with
the Prime Minister in April last year. He wrote 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 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
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?! Is 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. 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 princelings 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?!
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