Thanks to the constant prodding of the Supreme Court, the Union Government submitted a list of 627 Indians with foreign bank accounts on 29th October. This was to show that the Government was serious about recovering black money stashed abroad. The Attorney General of India said that roughly half of the listed individuals were Indian residents who could be prosecuted in this country. The rest did not live in India and could not be prosecuted against under Indian tax laws.
On 28th October, the Supreme Court had asked the Government to submit the names of those who have been parking black money in foreign bank accounts within 24 hours. The Court had said: “Don’t give us two or three names but all the names. Give us the entire list… whatever you have got from Germany, France, Switzerland and other countries. What you have disclosed could be a tip of the iceberg. This is going to be the first step – now, disclose everything. We can’t leave the issue completely to you. It may never happen during our time.”
On 29th October, the Supreme Court did not make public the list submitted to it in a sealed cover by the Centre. The Court left it to the Special Investigation Team to carry out the necessary investigation and ensure that a proper probe is done.
A Supreme Court bench, led by Chief Justice H. L Dattu, also asked the SIT to verify the list given by the Government and submit a status report by the end of November. The bench will take up the matter on 3rd December.
The government also did not press its application that sought restrictions over the disclosure of the names, due to confidentiality clauses in international treaties. It obtained a permission to raise all its arguments in this regard before the SIT.
There are no official estimates of India’s black economy. In 2011, the Government had commissioned a joint study by three think-tanks – the National Institute of Public Finance and Policy, National Institute of Financial Management and National Council of Applied Economic Research – to estimate the unaccounted wealth of Indian entities, at home and abroad. The final report is yet to be submitted.
Between 2002 and 2011, India was reportedly the fifth largest exporter of illicit money with a total of $343.04 billion. In 2011, it was placed third when $84.93 billion was sent abroad.
According to a 2013 report titled Illicit Financial Flows from Developing Countries: 2002-2011, produced by Global Financial Integrity, a Washington, DC-based non-profit, research and advocacy organisation, Indians salted away $462 billion in overseas tax havens between 1948 and 2008. According to the Central Bureau of Investigation, Indians stashed away $500 billion in tax havens across the world. In 2011, a BJP task force, however, pegged the amount much higher at $1.4 trillion.
It is no surprise that the government has been sitting on information it has received from foreign countries in this regard. For instance, in 2009, Germany handed over a list of Indian account-holders in LGT Bank, Liechtenstein, a European principality. In 2011, France handed over a list of 782 Indian citizens who supposedly hold HSBC accounts in Geneva.
On 27th May, days after being sworn into office, the BJP-led NDA Government set up a high-powered Special Investigative Team, headed by retired Supreme Court judge MB Shah, to look into the issue. On 16th October, it told the apex court that disclosing the names of those who have deposited money in banks abroad jeopardises India’s tax agreements with other nations who have provided the information in the first place.
The moot question here is: What can be done to remedy the situation? The Government has two laws which it is using to deal with black money – the Prevention of Money Laundering Act, 2002, and the Foreign Exchange Management Act, 1999. Most of the punitive action is taken in the monetary form. In a few cases only have people been arrested.
A huge amount of black money that goes out of India through hawala operators is re-routed into the country in the form of foreign direct investment. This was reported in a White Paper on black money, published in 2012 by the Union Ministry of Finance. As per data released by the Department of Industrial Policy and Promotion, between April 2000 and March 2011, FDI from Mauritius was 41.80 per cent of the entire FDI received by India, whereas Singapore contributed about 9.17 per cent.
This situation can be fixed and the SIT has made some good recommendations. The Government can start making changes by implementing the M. C Josh Committee report, which advocated rigorous imprisonment for those convicted under the Prevention of Corruption Act, 1988. This will deter black money holders. The Government should also set up a National Tax Tribunal and report bulky global financial transactions to the law enforcement agencies, much like it is done in America under the USA Patriot Act.