|Rediff India Abroad Home | All the sections|
Public loot since 1947: Let us bring back our money
April 15, 2008
It is one of the biggest loots witnessed by mankind -- the loot of the aam aadmi (common man) since 1947 by his brethren occupying public office.
It has been orchestrated by politicians, bureaucrats and some businessmen. The list is almost all-encompassing. No wonder, everyone in India loots with impunity and without any fear.
What is even more depressing in that this ill-gotten wealth of ours has been stashed away abroad into secret bank accounts located in some of the world's best known tax havens. And to that extent the Indian economy has been striped of its wealth.
Ordinary Indians may not be exactly aware of how such secret accounts operate and what are the rules and regulations that go on to govern such tax havens. However, one may well be aware of 'Swiss bank accounts,' the shorthand for murky dealings, secrecy and of course pilferage from developing countries into rich developed ones.
In fact, some finance experts and economists believe tax havens to be a conspiracy of the western world against the poor countries. By allowing the proliferation of tax havens in the twentieth century, the western world explicitly encourages the movement of scarce capital from the developing countries to the rich.
In March 2005, the Tax Justice Network (TJN) published a research finding demonstrating that $11.5 trillion of personal wealth was held offshore by rich individuals across the globe. The findings estimated that a large proportion of this wealth was managed from some 70 tax havens.
Further, augmenting these studies of TJN, Raymond Baker -- in his widely celebrated book titled Capitalism's Achilles Heel: Dirty Money and How to Renew the Free Market System -- estimates that at least $5 trillion have been shifted out of poorer countries to the West since the mid-1970s. It is further estimated by experts that one per cent of the world's population holds more than 57 per cent of total global wealth, routing it invariably through these tax havens. How much of this is from India is anybody's guess.
What is to be noted here is that most of the wealth of Indians parked in these tax havens is illegitimate money acquired through corrupt means. Naturally the secrecy associated with the bank accounts in such places is central to the issue, not their low tax rates as the term 'tax havens' suggests. Remember Bofors and how India could not trace the ultimate beneficiary of those transactions because of the secrecy associated with these bank accounts?
But this piece is not about Western conspiracy. Rather it is all about recovering out own wealth from these countries. And in this initiative, for obvious reasons, one can expect absolute stonewalling by our own government as well as foreign ones.
Naturally this has to be a public initiative -- an initiative by you and me, jointly ensuring that our government acts decisively. And in this process there can be no place for any debate -- either you are with this initiative or against it.
Lingua franca in Zurich is, believe it or not, Hindi!
Professor R Vaidyanathan of the Indian Institute of Management, Bangalore, is one of the most respected and well-known authorities on this subject. Writing his columns on this subject in a Chennai-based daily recently he pointed out that "Zurich is the only European town where Hindi slogans are written on the side of the tram-cars. Of course, it is supposedly linked to Bollywood, but the other India traffic to Zurich is to be seen to be believed." Isn't this is straight from Ripley's Believe it or Not?
The reasons, according to him, for such heavy Indian traffic to Zurich are obvious. The secrecy laws of these banks mandate personal presence in these tax havens with their passports to operate accounts: passport numbers are crucial to determine the secret code for opening and operating these bank accounts. No wonder many people keep their old expired passports as prized possessions. Apparently this is not to show their grandchildren where they travelled in their younger days.
In one of my recent columns -- Fraud Survey: Will India Inc respond -- I pointed out as to how a bank employee in Lichtenstein, a tax haven, provided details of some account holders to German revenue authorities. Subsequent press reports on the issue point out to the fact that this list contains details of people of other nationalities as well. More importantly, German authorities have expressed willingness to share this information with other nations too.
It is thus no surprise that quite a few European countries -- viz., Finland, Sweden, Norway -- have already expressed interest in the data obtained by the German intelligence agency while Indian authorities have remained silent. No prizes for guessing why.
What is galling to note is that it is suspected by the Reserve Bank of India [Get Quote] that this ill-gotten wealth of the rich and mighty Indians finds it way back to the Indian stock markets through the obnoxious Participatory Notes (PNs) route. And if appropriately routed through Mauritius, tax experts opine that any profits arising from such investments are exempt from taxes, both in India and Mauritius. What an arrangement!
Will our politicians do an Obama?
Nigeria, (General Sani Abacha), Peru (Alberto Fujimori) and the Philippines (Ferdinand Marcos) are three well known cases wherein these countries have been successful in getting back the money stashed into such tax havens by their leaders.
And such efforts are being increasingly duplicated by different regimes in various parts of the world to recover such national wealth stashed abroad. The point to be noted is that the secrecy of such banks is no longer impregnable. Global experiences show that the determined will of a sovereign nation is sufficient to break it.
Strangely, and in direct contrast to these global developments, there is no such movement in India. In fact, post-1989 elections, corruption has ceased to be a central issue at the national elections.
The answer to that is apparent. The instances quoted above are of countries that were once ruled by dictators. And action for getting back the national wealth was initiated after such dictators were deposed and replaced by regimes that were bitterly opposed to such dictators.
In contrast, in India every political party knows that it cannot accuse the other of being corrupt for the fear of being becoming the target itself. Hence, there is an unwritten truce between political parties not to charge the other of being corrupt.
In fact, elections in India offer a choice between Tweedledum and Tweedledee to the electorate. As the Hindi saying goes: Hamam mein sab nangey hain (everyone is naked in the bath). No wonder, in India, while democracy facilitates frequent changes of government, the Indian brand of democracy has not been potent enough to tackle the issue of corruption.
And this substantially -- if not wholly explains -- as to why Indians, especially youngsters, are so cynical about political leaders, democratic institutions and even democracy. And this when Barack Obama, the Democratic Party candidate for the US President elections, has along with few other colleagues in the US Senate introduced a bill in early 2007 titled 'Stop Tax Haven Abuse Act.' This Act broadly seeks to:
No wonder Obama, despite all the apparent disadvantages, has endeared himself to the electorate in the US. Crucially, would any Indian politician come up with a similar Bill (with appropriate Indian variations) in our Parliament? This is indeed an open challenge to the UPA, NDA and the ever-ready to be born 'Third Front.'
Corruption as an election agenda
Simultaneously, we the people of this country must ensure that corruption becomes the central issue in the following general elections. It is unfortunate that at a subconscious level, we seem to have given up our fight against corruption. Perhaps its gargantuan size seems to have overwhelmed us psychologically. Apart from the need for the legislation as mentioned above we also need to ensure:
But that is not all. Huge sums of public money have been stashed abroad by Indians in various tax havens. Our democracy and democratic traditions with all their pitfalls as explained above are incompetent to deal with the extant issue. And if we have to recover our money, it can be done through a direct action of the aam aadmi -- you and me. Are you ready?
The author is a Chennai-based Chartered Accountant. He can be contacted at email@example.com
More Guest Columns