Why are Indians so much hyper about black money abroad when it is a worldwide phenomenon? - T. N. Pandey
•
2 likes•414 views
Why are Indians so much hyper about black money abroad when it is a worldwide phenomenon? - T. N. Pandey - Article published in Business Advisor, dated February 25, 2015 http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/
Recommended
More Related Content
What's hot
What's hot (12)
Similar to Why are Indians so much hyper about black money abroad when it is a worldwide phenomenon? - T. N. Pandey
Similar to Why are Indians so much hyper about black money abroad when it is a worldwide phenomenon? - T. N. Pandey (20)
More from D Murali ☆
More from D Murali ☆ (20)
Recently uploaded
Recently uploaded (20)
Why are Indians so much hyper about black money abroad when it is a worldwide phenomenon? - T. N. Pandey
- 1. Volume X Part 4 February 25, 2015 3 Business Advisor Why are Indians so much hyper about black money abroad when it is a worldwide phenomenon? T. N. Pandey The issue concerning black money stashed in foreign bank accounts has again come into forefront in the country because of the new names, which come into the public domain as a result of a global investigation by the International Consortium of Investigative Journalists (ICIJ). The names were obtained by ICIJ, which unveiled the identity of about one lakh account holders from all parts of the world in the Swiss subsidiary of HSBC Bank. The list includes both Indian citizens and people of Indian origin. The latest edition of the HSBC list was published by media organisations that are part of the ICIJ project, including The Guardian of the UK and France‘s Le Monde. The global list of one lakh includes names of politicians and businessmen from all parts of the world. The balance in the accounts held by the 1,195 persons with Indian links came to Rs 25,420 crore in 2006-07, much more than the earlier estimate of Rs. 4,500 crore corresponding to the 628 individuals in the first HSBC list. The total balance in the accounts came to $100 billion, as per the news reports. 2. Tax evasion is a worldwide phenomenon The earlier account brings out the position that tax evasion is not confined to one or two or a few countries but is a worldwide phenomenon, not concerning only some particular classes or persons. Reports published in The Indian Express dated February 9, 2015, show that its reporters found the names of current and former politicians from Britain, Russia, Ukraine, Georgia, Kenya, Romania, India, Liechtenstein, Mexico, Tunisia, the Democratic Republic of the Congo, Zimbabwe, Rwanda, Paraguay, Djibouti, Senegal, the Philippines and Algeria, among others. Some clients linked to millions and sometimes tens of millions of dollars in their accounts are politically connected figures such as Rami Makhlouf, whose cousin and close associate, Syrian President Bashar Al Assad, over the past three years has helped cause the deaths of tens of thousands of his citizens in the
- 2. Volume X Part 4 February 25, 2015 4 Business Advisor country‘s civil war. Makhlouf is listed as a beneficial owner on multiple accounts. 2.1 In a reflection of the sheer variety of names in the data, others who appear are Li Xiaolin, the daughter of former Chinese Premier Li Peng, famous for his role in the Tiananmen Square massacre; Joseph Fox, a judge on Hong Kong‘s highest court; and Prince Michael of Kent, the beloved cousin of Queen Elizabeth II of England, and his wife. 2.2 The accounts that can be linked to the prince and princess were held in the name of their company, Cantium Services Limited. A representative for the couple said that the account ―never received nor held any funds‖ and was closed in 2009. 2.3 Li Xiaolin is listed, along with her husband, as a beneficial owner of an account that held US$2.5mn. Fox is listed as the holder of an account that was closed in 2002. They did not respond to requests for comment. The files reflect a spectrum of royalty, from King Mohammed VI of Morocco to the Crown Prince of Bahrain, Prince Salman bin Hamad bin Isa Al Khalifa, to dozens of members of Saudi Arabia‘s ruling family. Many were partial or full beneficial owners of accounts. An analysis of the files by ICIJ shows that many individuals linked to accounts took extra precautions to protect their identities, even though HSBC staff repeatedly assured customers they were already bound by tight Swiss banking secrecy. 2.4 Many of the accounts were held by companies in offshore tax havens such as the British Virgin Islands, Panama or in the remote Pacific island of Niue, rather than by the individuals who owned the money. Thousands were used, de-identified, numbered accounts. 3. Other account holders The other account holders included arms dealers, blood diamond merchants. HSBC‘s clients‘ links to Al Qaeda were first publicly raised in a July 2012 US Senate report, which cited an alleged internal Al Qaeda list of financial benefactors. The Senate report said that the list came to light after a search of the Bosnian offices of the Benevolence International Foundation, a Saudi-based non-profit organisation that the US Treasury Department has designated as a terrorist organisation. 4. Number of account holders The Indian Express report gives an idea about number of accounts holders involved in different countries, where India ranks at No. 16. Top 10 account holders are:
- 3. Volume X Part 4 February 25, 2015 5 Business Advisor Countries with maximum a/c holders in HSBC‘s Swiss private banking arm 1. Switzerland 11,235 2. France 9,187 3. UK 8,844 4. Brazil 8667 5. Italy 7,499 6. Israel 6,554 7. US 4,183 8. Argentina 3,625 9. Turkey 3,105 10. Belgium 3,004 5. Quantum of funds involved Countries with maximum cash deposited in HSBC‘s Swiss private banking arm: 1. Switzerland $31.24bn 2. UK $21.71bn 3. Venezuela $14.79bn 4. US $13.9bn 5. France $12.50bn 6. Israel $9.99bn 7. Italy $7.46bn 8. Bahamas $7.09bn 9. Brazil $7.08bn 10. Belgium $6.26bn
- 4. Volume X Part 4 February 25, 2015 6 Business Advisor 6. Indians’ involvement In the list comprising nearly one lakh names, Indian names are only 1,195 (including 628 disclosed earlier) and the amount involved is merely Rs 25,420 crore in the total which works out to 102.05 billion dollars (for the period 2006-07). These indicate the quantum of Indians‘ involvement. All the names are not of illegitimate account holders. Many of these are claimed to be legal and explainable. Important Indians whose names appear in the list, such as Mukesh Ambani, Anil Ambani, Naresh Kumar Goel, Burman family, Preeneet Kaur, Rames etc. have either denied the existence of such accounts or have said that the same are explainable. Though significant, the amounts are not such as may involve hue and cry as is being done concerning black money abroad. The reasons for this seem to be mixing black money issue with politics. The new BJP Government in India at the Centre is often criticised for non-fulfillment of (alleged) election time promise that the new government will bring all black money of Indians in foreign banks within six months of coming into power and that each Indian‘s account will be credited with Rs 15 lakhs of black money. There does not seem to any authentic basis for such a promise which in any case could not have been made as the people during electioneering could not have been so immature as to make such promises but regretfully there is no authoritative denial from this Government‘s side that any such promise was made, though one of the Ministers of the Government (Venkaiah Naidu) has denied that during electioneering no such statement was made by anyone in the Government! Too much hype is being given to black money abroad in the post-election period after the formation of the new government. 7. Aberration in economy Black money no doubt is an aberration in the functioning of any economy and needs to be strictly controlled. But this does not mean that undue time and energy should be spent on chasing something which is uncertain and incapable of being quantified to a definite figure and recovered. There is no point in keeping the issue of black money as a political pastime. Unfortunately, in India, this is being done and special team headed by two Supreme Court judges and a host of regulatory authorities are involved in making enquiries about evasion that took place in the year 2006-07 and earlier years. There is no possibility of huge revenue gains. (According to SIT, Rs 10,000 crore are expected to be coming to the Government kitty by 31.03.2015 from undisclosed account in HSBC‘s Swiss subsidiary.) There is no estimate of such amounts in other countries, the quantum of amounts involved, the chances of income tax recovery from such sums, the time likely to be involved in checking such accounts, the manpower required and
- 5. Volume X Part 4 February 25, 2015 7 Business Advisor chances of punishing the delinquents. Such gains even if some are realised are not likely to be commensurate with the efforts that are being put or will be needed. 8. Some suggestions Instead of chasing old transactions and raising the issue of black money from time to time, a body like SIT can be entrusted the task of devising ways and means to: (i) check future generation of black money; (ii) ensure that remittances to other countries in a clandestine manner are checked effectively; (iii) devise stringent punishments, which can be easily imposed for those who indulge in black money deals and do not discharge their tax obligations correctly; (iv) declare tax evasion as a criminal offence from being a civil offence as it is at present; (v) prescribe civil disqualifications like debarring from holding of public offices for those who are found to be indulging in tax evasion and black money deals; (vi) curriculum for schools should be devised which make children right from the school days to realise that honest tax payment is an honourable obligation of citizens towards the State. (vii) India must cite the automatic information exchange pact, a part of the Organisation for Economic Cooperation and Development‘s campaign to end base erosion and profit shifting by multinational corporations. With effective information sharing, audit trails can be established on complex deals in a globalised world. India should take a page from the British government and ask companies to identify their real owners and make the registry public. The larger point is to pull all stops to curb the black money menace. 8. Concluding comments Undue hype should not be generated when something about black money is published. It should not unsettle the Government‘s functioning. It should be dealt with in the normal way. Instead of flogging the dead horse of 2006-07 and earlier, it would be better to concentrate on how the generation of black money can be checked. Policy priority should be to stem further generation of such money and check incentives that lead to such generation. In this context, some suggestions given in this write up can be given thought. (T. N. Pandey is Former Chairman, Central Board of Direct Taxes)