Time to unmask and name tax evaders

Description

The Government of India got thousands of accounts of Indians holding illegal wealth in HSBC bank in Switzerland. The data was obtained by the French from people who had stolen more than 15,000 accounts from HSBC data files. The French have given the full data set to us. In the midst of the Anna movement, one important thing has been pushed to the background. It is the Gangotri of corruption but less focused and talked about. Barack Obama is concerned about it, Angela Merkel is furious about it, and Nicolas Sarkozy wants to regulate it, but the leaders of one of the most affected countries, namely India, are not saying or doing anything about it. They are the tax havens or offshore financial centers where the ill-gotten wealth of tax evaders of many countries is hoarded. The Liechtenstein affair highlights this issue. Liechtenstein is both a country and a convenient "letter box" for moneyed people all over the world to hide their ill-gotten wealth. It is a small principality where if you jog a little longer you may end up in the next country. The crown prince, Johannes Adam Ferdinand Alois Josef Maria Marko d'Aviano Pius von und zu Liechtenstein, is angry with Germany for launching a massive tax evasion investigation involving funds hidden away in his country's vaults. Germany's intelligence agency reportedly paid an unnamed informer more than $6 million for confidential and secret data about clients of LGT Group, a bank owned by the Prince's family. The revelations led to the resignation of the head of Deutsche Post, the former German mail service and now the world's largest logistics company. Liechtenstein's leaders are furious and have focused on the theft of the data rather than the facts of the case. The German government announced it would share information on accounts held in tax havens with any government that wanted it. The spokesman for the German Finance Ministry indicated that they would respond without charging fees. Finland, Sweden and Norway expressed interest in the data. The interesting part is that the Indian government was very reluctant to obtain this data from Germany. It finally acquired the data under pressure in 2009, and more than a hundred names are presumed to be on that list, but the results have not been shared with Indian citizens. It is common knowledge that trillions of dollars of Indian money are held in various tax havens such as Antigua, Switzerland, the Bahamas, Liechtenstein, the Isle of Man and St. Kitts. During the Nehruvian socialistic period, under-invoicing of exports and over-invoicing of imports were common, leading to funds being siphoned off to these tax havens. In a sense, all sections—business, political, film, sports and bureaucracy—participated in creating what may be termed "secular ill-gotten wealth" cutting across caste and creed distinctions. The Government claims it cannot release the names due to double taxation treaties, though the stolen data is not directly linked to such treaties. The Government remains intransigent. A few months earlier, India also obtained nearly a thousand accounts of Indians holding illegal wealth in HSBC Switzerland. This data too was obtained from stolen records and shared by the French. However, the Government has not disclosed the names or actions taken. The Finance Minister continues to cite double taxation treaties as a reason, though such treaties usually have only prospective effect. What is needed is political will to bring back illegal funds. From Bofors to CWG to 2G to Hasan Ali, illegal money trails often lead to tax havens. Estimates suggest between half a trillion and one and a half trillion dollars of illicit Indian wealth may be stashed abroad by political leaders, business personalities, bureaucrats, film stars and sports icons. The issue is important for several reasons. First, global capital flows influence Indian markets, and such flows may include illicit funds. Second, there are concerns about terror financing entering through financial systems. Third, policy decisions may be influenced or compromised due to external pressures if elites hold illegal funds abroad. Fourth, there is the broader issue of political will to bring tax havens onto the global agenda and shut down such systems. These small island tax havens served a purpose in the past, but in the 21st century, transparency and integrity must prevail. India should enact stronger laws, possibly creating trusts to reclaim illegal wealth, and collaborate with other emerging economies to bring accountability to global financial systems and benefit deprived populations across the world.

Publication Date

1-9-2011

Publication Title

The Free Press Journal

Publisher

Indian National Press

Keywords

Financial management, Financial system, Taxation

Source Link URL

https://www.freepressjournal.in/news/18167-time-to-unmask-and-name-tax-evaders.html

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