After dilly-dallying for over five years, the United Progressive Alliance (UPA) government has finally ratified the UN Convention Against Corruption. It has also signed double taxation treaties with 80 countries and tax information exchange agreements with five nations. But, have we been able to leverage any of these initiatives to curb the flow of illicit wealth from India to tax havens across the world? The "information received under the double taxation avoidance agreement (DTAA) is covered by the confidential provision of the DTAA".
Let us examine the efficacy of each of these developments vis-à-vis the gargantuan problem of Indian black money in foreign banks. The commitment of the UPA to tackle the problem of corruption can be gauged from the fact that the UN Convention was signed by India two years after it was adopted and on the last day designated by the UN for signatures ( December 9, 2005). Thereafter, despite mounting agitation within the country about rampant corruption, the ratification of the convention was delayed by the government until May, 2011. The government of course will have an explanation for the delay, as it does for every act of omission on its part, but this will not hold water.
This convention expects all countries to cooperate with one another "in every aspect of the fight against corruption, including prevention, investigation, and the prosecution of offenders". Countries are bound to render assistance in gathering and transferring evidence and to extradite offenders. Countries are also required to trace, freeze and confiscate the proceeds of corruption. Since the convention gives our government such wide-ranging international support to track down citizens who have parked illicit funds abroad, the delay in ratifying the convention and leveraging it tackle the problem of black money appears inexplicable.
As regards the double taxation treaties - the Double Taxation Avoidance Agreement (DTAA) - there is nothing in the public domain so far to suggest that the government has suo moto leveraged these agreements to go after the hoarders of black money in foreign banks. Also, even when information is thrust on it, the offenders cannot be named or prosecuted. The Finance Minister, Pranab Mukherjee, told the Rajya Sabha on August 2 last that "whenever information about money deposited in any foreign bank account is obtained, the same is verified and then action is taken in accordance with law to bring the undisclosed amount of taxation". This may seem laughable, but this is all that the government can do - "bring the undisclosed amount of taxation"! Further, the DTAA which the government has signed with 80 countries presents a bigger obstacle. The minister says this agreement does not allow the government to disclose the names of the offenders. The government is duty bound to keep the names of the culprits secret.
In other words, all that it will help us do is to identify the offender and coax him to own up the illegal bank account he holds in Switzerland, Liechtenstein or Mauritius and pay up the income tax which he has avoided. Nothing more is possible. These are extraordinary firewalls built by lawmakers to protect the interests of politicians, businessmen and bureaucrats and other unscrupulous citizens who have stashed away illicit wealth outside the country. Using these provisions, which shield offenders, the government has protected the identity of the account holders in the UGT Bank in Liechtenstein. The government told parliament that it had raised a total tax demand of Rs 24.26 crore against 18 individuals who held these accounts. Once these individuals pay these taxes and penalties, it will be business as usual for all of them!
Similar mischief is afoot vis-à-vis the 700 account holders in HSBC Bank, Switzerland. Ever since it got the list from France, the Union government has been in a flap. To borrow a phrase made popular by an Indian diplomat, finance ministry officials and those in regulatory agencies have been running around like headless chickens not knowing how to deal with this information. In any case the current approach appears to be to treat the offenders with kid gloves. Media reports indicate that the Income Tax Department has summoned these offenders and asked them to declare their offshore holdings. Since the law permits income tax payers to file revised returns, this is to be made use of. Such "voluntary" declarations will obviate the need for prosecution.
Over the last couple of years several individuals and institutions have wake up the government. A Task Force constituted by the Bharatiya Janata Party (BJP) conducted an in-depth study of the problem and made a set of valuable recommendations. The Supreme Court has been trying to coax the government into action. Baba Ramdev has been traveling across the country to raise public awareness and to demand action. Several prominent citizens like Dr Subramanian Swamy and Ram Jethmalani have been campaigning for administrative or legal remedies to tackle the menace. Finally, LK Advani has launched yet another
Bharat Yatra to stir the conscience of those who run the Union government. But, none of this has worked.
The government has stonewalled all these initiatives. It has rubbished the BJP's efforts as political gimmickry, used the strong arm of the State to stifle Baba Ramdev and told the Supreme Court that it does not want a court-appointed Special investigation Team (SIT) to probe black money. However, on its part, it has done nothing to deal with the problem. The attitude of the government raises some disturbing questions. If double taxation treaties only shield crooks, why is the government happily signing such treaties with more and more countries? If existing tax laws do not permit the State to institute criminal proceedings against persons who rob India and deposit the loot outside the country, why is not the government proposing deterrent provisions in our laws to shame the culprits, freeze their accounts and jail them? Going by the government's delayed response to the UN Convention against Corruption and its non-response to legitimate demands within the country for strong anti-corruption measures, citizens want to know who is blocking firm executive and legislative action against corruption. We must hope that someday, someone in government will speak up. Until then, the needle of suspicion will surely point towards those who own and control the Congress Party!
After dilly-dallying for over five years, the United Progressive Alliance (UPA) government has finally ratified the UN Convention Against Corruption. It has also signed double taxation treaties with 80 countries and tax information exchange agreements with five nations. But, have we been able to leverage any of these initiatives to curb the flow of illicit wealth from India to tax havens across the world?
The "information received under the double taxation avoidance agreement (DTAA) is covered by the confidential provision of the DTAA".