Author: Lola Nayar
Publication: Outlook
Date: June 20, 2011
URL: http://www.outlookindia.com/article.aspx?277042
A lack of sincerity is evident in the Centre's
overtures on black money
As a pitched battle between civil society
and the political class plays out in the maidans and the media, the idea of
"getting back" the black money stashed overseas has become the holy
grail of the fight against corruption. It's gone beyond the politically savvy
strategy that the BJP, among others, unveiled in the run-up to the 2009 general
elections. Whether it is $500 billion or $1.4 trillion, there's no denying
that the prospect of getting back even a fraction of the black money estimates
has deep resonance for a public fed up with the daily soap of scams while
struggling to make ends meet.
Against this growing outpouring of anger against
corruption, the government has been trying to point to issues of practicality.
While generally acquiescing to the demands of civil society (a section of
which is currently involved in a cantankerous co-drafting of the Lokpal Bill),
the government has been casting doubts on the intentions/political agenda
of the players. There's also been a rash of commentary on how some of the
measures to curb black money-like declaring it a "national asset"
or handing out stiff jail sentences and worse to offenders-are just earnest
sentiments, and can't really be implemented.
That may well be the case-but remember it's
the political class and the bureaucracy that will have to finally act on tackling
the issue of black money. Though the corporate sector is generally blamed
for fostering the parallel economy, experts apportion a larger share of the
blame on other, known players. The most obvious one, sadly, is the politician
(commenting on the jump in personal assets declared by members of Parliament
from one election to another, a former CBDT chief points out, "The declared
asset of the politician is just the white money part.").
No less involved are sections of the bureaucracy
(consider the recent examples of Neera Yadav, former UP chief secretary, Arvind
and Tinu Joshi, and B.S. Lalli, CEO of Prasar Bharati, all of whom face really
serious charges of corruption). Then, of course, key players are sundry deal-makers
(of whom we caught some enlightening snippets in the Niira Radia tapes).
While all the impediments are known, the UPA
is doing what governments do best: setting up a number of committees to suggest
action plans. But going by past track records, the committees don't inspire
confidence. Despite some high-profile arrests in the 2G-spectrum case, so
far the government's actions to root out corruption, on which the black economy
thrives, remains suspect. In fact, it's got people wondering: how serious
is the government about tackling the issue of black money?
"My study shows that the government is
not serious about tackling the issue. It's dragging its feet. This perception
is spreading and it's not desirable," says R. Vaidyanathan, professor
of finance at IIM-B. That's becasue this further fosters the perception that
the government is also involved. It's an act of omission rather than commission,
he warns.
Totally sceptical of government's avowed intentions
to act on black money, Promod Chawla of the National Network For India Trust
points to his own experience over the past two years trying to ferret information
through RTIs-including to the cabinet secretariat-on government efforts to
get back funds from accounts held by Indians in Swiss banks. After doing many
rounds of the various government departments, on May 24, 2011, he got a reply
stating that the Enforcement Directorate has rejected the RTI query as it
is "devoid of merit".
"It's a cat-and-mouse game. The effort
of the regime is to tire you out. The regime has all the powers to hide and
not give you all the information," says Promod, who confesses that his
group's efforts to unravel black economy over the last four years have led
to several dead-ends. What the group's study has reinforced is the belief
that an estimated 50 per cent of funds stashed overseas belongs to politicians,
40 per cent to past and present bureaucrats and the remaining 10 per cent
to businessmen, drug and arms dealers.
Tax reforms expert V.U. Eradi, who served
as joint secretary during V.P. Singh's tenure as finance minister, echoes
the sentiments, "We are not serious about getting the information. In
fact, we are afraid to get it as we will not know what to do...it will be
far too explosive." Eradi buttresses his argument by pointing to a report
in the Economist last year which highlighted how the EU had negotiated with
the Swiss government to get a part of the tax levied on the money parked in
the banks by non-residents, while India "has not even thought to do the
same".
Using the route used by the EU, India too
could get an estimate of the funds parked there by Indians and perhaps later
use the US method to gain access to 'tax evaders'. Many of the experts who
have had an inside view of the negotiations overseas or have participated
in international meets on money-laundering reveal that in private their foreign
counterparts often express amazement that Indian officials just don't want
to get the information available. This has been the story for the past 20
years.
Prof Arun Kumar of JNU, an authority on black
money, is scathing about the tardy manner in which Indian authorities are
pursuing cases abroad (particularly when countries like Germany are even offering
information). "It is possibly to give time to account-holders to settle
things," states Kumar, contrasting the Indian government attitude to
the many lines of action pursued by the US-including the threat to take over
ubs's US operations to access the names and bring the culprits to book.
Most experts agree that, partly thanks to
the global fight against terror, tax havens and banking secrecy are vulnerable
concepts-in fact, this is the best time for governments to deliver a body
blow to the parallel economy. "In India, we have a history of spoiling
our case despite Supreme Court strictures and having all the mechanisms to
gather information," stresses Kumar, citing black economy as the cause
for the various economic problems in the country, including poverty and inequality.
Experts estimate that around 50 per cent of
GDP-or about Rs 33 lakh crore of black money-is generated every year through
corruption at various levels. While black money which operates within the
country can be productive, what goes overseas is seen as non-productive.
Dr Shankar Acharya of ICRIER, who had done
a study of black money in the mid-'80s, underlines that while economic reforms
did away with licence raj, continuing government control on land use and other
discretionary powers as in the case of mineral resources is fostering the
black economy. So whether it is spectrum or defence deals or infrastructure
contracts, kickbacks and paybacks persist. Similarly, all government jobs
and plum postings as head of psus are reported to carry considerable value.
Stating that "our system of election funding" at all levels has
"created a demand for black money", Acharya adds, "I don't
know if this government has done much to tackle the black money issue."
Sure, the government has done some work. It
has, for instance, renegotiated avoidance of double taxation agreements with
44 countries, which will facilitate sharing of information, including banking
flows. Similarly, it has worked out arrangements with 14 out of 70 tax havens
to get access to fund flows from Indians. But there is disquiet that all these
may only help in future cases, while putting the lid on old cases. Unless,
that is, the government wishes otherwise.
Having seen the track record with Bofors and
the Hasan Ali cases, bringing the small fry in the net and letting big ones
escape is not likely to appease the masses. So far, despite ample evidence,
government action has been found lacking. Author of Crime and Money Laundering,
Jyoti Trehan, who has served a stint with Interpol, is sad that the proposal
to set up a Money Laundering Authority with the best talents, as envisaged
under existing laws, never got translated into action. "Instead, the
moth-eaten Directorate of Enforcement, which is not equipped to handle such
cases, has been given the task," says Trehan, underlining that black
money is just one aspect of transnational crimes.
If some say that black money overseas is nothing
but an over-hyped myth, government action on tackling the issue-even to just
debunk it-is seen as a complete farce. And the way things are moving, it's
only going to fuel the common perception about enormous, ill-gotten Indian
wealth overseas.
