Show Me The Colour Of Your Money

Show Me The Colour Of Your Money

 The Modi Government has shown a greater seriousness than any of its predecessors in the pursuit of Black Money stashed abroad by establishing an SIT, soon after coming to power.

Between ex Supreme Court judges on the SIT, and the current Supreme Court monitoring the issue, there is great focus on the matter.  

The SIT has already ploughed through data related to some old lists of possible culprits, and now has a new one of 1,195 persons named on a HSBC Geneva Branch list. Nearly 500 people have already been contacted by the SIT, and many of them have admitted to tax evasion. But as this grind goes on, the quantum money in the foreign bank accounts is dwindling fast.

The process, involving the evaluation of data by different governments, takes a very long time.  Still, the Modi Government’s approach is to let the Courts decide, so that no charges of malice or vendetta can be levelled against it. The SIT has readied work on between 350 and 500 cases. The names made public by Indian Express via Le Monde may not all be evaders at all.

Wild or sensationalised attempts to effect a complicated chase after Black Money will yield nil results.  But, estimates of the monies stashed abroad illegally does run into $ 500 billion.

The hunt for ‘Black Money’, either held in cash, or in ‘safe havens’ domestically or abroad, comes up like a virus attack into the Governmental and public media space every now and then.  But the rank hypocrisy that attends this vexing question is like an independent law unto itself.

Some amounts, sometimes running into crores, are routinely caught and confiscated. But, nothing substantial has ever been done to effectively put a stop to either the generation, or concealment of Black Money.

At the heart of the problem is an inefficient system of tax collection, combined with a very high indirect and direct tax regime. The Black Money economy feels justified in its illegalities. It cites the inefficient use of tax money by the Government, and its rampant corruption and extortion at all levels.

And even when tax evasion is caught red-handed, it is quite often possible  to bribe one’s way out of it.

The incentive to evade taxes exists in all countries. It draws the ire of Civil Society here because it is a compendium of many instances of ill-gotten gain through bribery and corruption, combined with blatant tax evasion.

Yet Black Money is so pervasive that it runs a parallel economy that rivals the official one in size, if  not in scope. And as India’s economy grows,   and it is slated to grow at 7.5% in 2015, its Black Money economy will definitely keep up with it.   

Lately, the question of its ‘recovery’ has become something of a political football. Switzerland, with its famous confidentiality laws and numbered accounts, actually taxes its bank deposits. There are others, around the globe, which are tax-free and no-questions-asked.

Of course, seizing and bringing any of this money back to India is easier said than done. The foreign governments need proof of tax evasion that they will evaluate independently before giving their opinion. They won’t cooperate with ‘stolen’ lists. Every account held abroad by resident Indians has to be scrutinized individually, according to the Indian tax laws for wrongdoing.

NRI’s, in any case, are entitled to their stash abroad, and don’t pay Indian tax on their foreign income. A family, with some resident Indians and others who are non-resident, can, quite easily, spirit money abroad through extremely efficient international and unofficial banking channels aka  Hawala . These operate without traceable documentation. This money could then pass over to the NRIs in the family, and thereby not come legitimately into any Indian tax narrative.  

Indian law treats all financial wrong-doing as a civil offence, to be processed through its notoriously slow legal system. Tax evasion in America on the other hand, where it is not only both a civil and criminal offence, is dealt with fairly swiftly.  

The famous gangster from the 1930s, Al Capone, known to have personally murdered, or ordered the murder of many people, was, in the end, incarcerated. But he was jailed on charges of massive tax evasion and put away for the rest of his life.

Where it is going to be tough to get any Black Money back from abroad, other strategies should surely be considered. What can be done to wipe out the distinction between White Money and Black?

Any money put to work in the legitimate economy should be welcomed without questions. This may not be fair to honest tax payers, but it does make the best of a bad job.  Having said that, the question is, does the Modi Government want to solve this festering problem by doing away with the hypocrisy that surrounds it?

For: NitiCentral

(808 words)

February 9, 2015

Gautam Mukherjee