Only tax amnesty can get money out of Swiss banks

Sh. Joginder Singh ji
(Former Director – C.B.I.)

The Bharatiya Janata Party’s (BJP) prime ministerial candidate L.K. Advani has declared that if his party wins elections, they will bring back all Indian money held in secret bank accounts in tax havens abroad.
The Swiss Banking Association have allegedly stated that Indians had a whopping $1,456 billion in secret accounts. This is more than the balance held by all other nationalities taken together — the Russians have $470 billion, Britons have $390 billion and the Chinese have $96 billion.
Officially there is no government estimate of the black money, neither in India nor abroad. However, all channels of legal inflow and outflow of the money are under the control of the government.
What is stacked outside is black money or tax-evaded income. It is the heart and soul of the underground economy and is also called “No. 2” money. It exists even in rich nations, just like in poor and developing nations, though the amount varies.
It is a matter of record that approximately 80,000 Indians travel to Switzerland every year and nearly 25,000 of them go there frequently. Incidentally, the minimum balance required for opening a Swiss secret account is $10 million, or roughly Rs 50 crores. At the time of quota-permit Raj, as even now, it was common practice to under-invoice exports and over-invoice the imports. The balance was siphoned off, either abroad or used in the country. In India, most of our day-to-day transactions or purchases — ration, diary products, vegetable, purchasing bus or train tickets — are done in cash. India is the 83rd most corrupt country in the world. Bribes have become a part of daily life, even for getting what is due as a matter of a citizen’s right. Bribes are never paid by cheque, only by cash. The bureaucracy, which is called the steel frame of governance, has now become the “steal” frame.
However, under international pressure, mostly from US and other Western nations, Switzerland announced on March 29, 2009, that it would cooperate in international tax investigations. This statement, if implemented, would be a break from Switzerland’s long-standing tradition of protecting wealthy foreigners accused of hiding billions of dollars. Austria and Luxembourg also said they would help.
The problem of black money or stashing it abroad is not unique to India. To tackle this problem, US federal agencies have offered to reduce penalties. They also say that there would be no criminal prosecution provided US account-holders voluntarily come forward to disclose amounts stashed in Swiss banks and pay taxes at reduced rates in the next six months.
USB, Switzerland’s largest private bank, has been forced to divulge details to the US agencies investigating tax frauds and tax evasion. Unlawful money, as we all know, is used for unlawful and unethical activities.
But we should not hasten to jump to any conclusions — we can’t assume that the offer of cooperation by the Swiss government is going to bring all the black money back to India. Our laws and legal system provide a lot of scope to all wrongdoers to cock a snook at the nation. Take the case of a Pune-based businessman and racehorse owner Hassan Ali Khan who was raided by the income-tax department in 2007. He was found to be operating a bank account in UBS, Zurich, with a balance of $8 billion (Rs 36,000 crores). How his bank account swelled — from $1.5 million in 1982 to $8 billion by 2006 — is being investigated with the help of documents recovered by the agencies, some of which are duly notarised by the Notary Public of London.
The Enforcement Directorate has issued a show-cause notice to him under the Foreign Exchange Management Act (Fema). Under Fema, the maximum penalty imposed can be three times the amount involved. If imposed in this case, it would be over Rs 1 lakh crore.
How do you expect tax heavens, whose only business is to make money out of other people’s money, to come and depose against their clients in our country? Given the problems, why not put the onus on the accused to prove his/her innocence? The truth is that we do not punish our criminals, but give them a lot of publicity. The laws in our country have been reduced to cobwebs which can catch the small and the uninfluential, but allow big and rich criminals to escape.
This is very true of laws relating to black money, whether stashed in India or abroad. Our system and the high rate of corruption ensures that no major transaction, whether used to purchase property or to campaign for elections, can be completed without spending a major part of it in black money. There is no point in talking about bringing back all the wealth stashed by Indians abroad in tax havens unless we make it easy for the common man to do the right and difficult to do the wrong.
At the same time, we must remember that no man will easily part with his money. The only way of achieving any success in this seems to be to announce a “tax amnesty scheme” and treat the wealth brought back as foreign remittance which should be gainfully invested in development projects in the country. Otherwise there seems to be no chance or reason for such bank account holders to comply, especially when by spending a part of this money, on expensive and intelligent lawyers, such worthies can manage to stay outside the jail and drag court cases for decades.
Before we venture out, let us first put our own house in order. By not doing so we become a laughing stock not only in our own country but also for people outside. At the same time, any concrete effort to bring the illegal or ill-gotten gains is welcome. However, we should not abandon this issue post elections, as most election issues are, but take it to its logical end after the elections.