Indian Government expected to file affidavit on black money Monday

With its 48-hour deadline expiring on Friday, the union government is now expected to inform the Supreme Court Monday on its efforts towards retrieving over Rs.70 trillion ($1.4 trillion) in black money believed to be stashed away in foreign banks by Indians.
The government had made the commitment Wednesday before a bench of Chief Justice K.G.
Balakrishnan, while responding to a lawsuit accusing it of sitting idle on the question of retrieving the illicit wealth.
Asserting that the government is not sitting idle on the matter, Additional Solicitor General Gopal Subramaniam had offered to file an affidavit in the court within '48 hours', detailing the actions taken by it so far.
The government's self-set deadline of 48 hours began a little after 2 p.m. Wednesday and expired Friday.
Though the apex court had not issued any direction to the government to file the affidavit within '48 hours', the court, accepting the government's offer in good faith refrained from issuing any formal notice on the matter.
Without issuing any notice, the court adjourned the matter for next hearing to May 4.
The government is expected to file the affidavit on Monday, sources said.
Subramaniam had asserted Wednesday that the government had written to the German
government seeking details of the possible Indian citizens having secret accounts in foreign banks in that country within 24 hours. The move followed a report by a leading business daily in February 2008 that a former employee of the LGP bank in Liechtenstein had sold data on about 1,400 people who had money there to tax authorities across the world.
The German government, which too bought the data, had offered to provide it to any country that sought the information, the news report had said.
Subramaniam had said the New Delhi-based financial daily had carried the report on Feb 27, 2008, and the government had written to Germany seeking details of the possible Indian tax evaders on Feb 28, within 24 hours of the report being published.
He said the government had also received the German government's response, which he said could not be disclosed in the open court.
The union law ministry sources, however, attributed the government's failure in filing the affidavit within the 48 hours, to its 'displeasure at the highest level' with Subramaniam's 'over-enthusiasm' in self-imposing a deadline on filing the affidavit.
The sources said the government at its highest level is of the view that the law officer should not have made the commitment on his own, and that too such an early deadline.
The government is of the view that it would have preferred filing an affidavit only after issuance of notice on the lawsuit, said sources.
The officials said the government was however largely appreciative of Subramaniam's handling of the issue in the apex court, especially his arguments on the 'mystifying timing' of filing the lawsuit and the political motive behind it.
The lawsuit was filed Tuesday jointly by former law minister Ram Jethmalani, former Lok Sabha general secretary Subhash C. Kashyap and former Punjab Police chief K.P.S. Gill.
The lawsuit is based on a research article written by noted economist and Bangalore's Indian Institute of Management professor E. Vaidyanathan for the institute's in-house journal Eternal India.
Vaidyanathan has estimated that 'between 2002 to 2006, $1.4 billion, roughly equivalent to Rs.7,000 crore (Rs.70 billion), have been siphoned off from this country and stashed away in foreign banks'.
Return of the illegal wealth of Indians in foreign banks, particulary Swiss banks, has become a major poll planks of the Bharatiya Janata Party (BJP).
Source

Minting political capital

At first it seems like an idea from the 1970s. From the era of nationalisation. An idea whose time is past, that has become an alibi. Indeed, when L.K. Advani, PM-designate for the NDA, first spoke about it last Sunday, it seemed like a hard weave and dodge to duck the imbroglio involving Varun Gandhi.
By April 1 it was an SMS in demand. It seemed the time was just right for the idea of getting stashed loot back to the country. Suddenly the BJP itself woke up to an idea with all the makings of sound political capital.
The idea itself was born of a political imperative and economic circumstance. The political imperative stems from the need for a differentiator in an era when mandates are jigsaw puzzles and the economic circumstance calls for an idea that works both as rhetoric and a promise of a better life.
After all, the estimated $500 bn stashed abroad is enough stimulus to resurrect growth and alter the face of India's infrastructure. Sure, the first debate on Swiss numbered accounts featured in Parliament in December 1968 and after two decades of probe and litigation on the Bofors case nobody saw any of the bribe money. The circumstance, though, has changed.
Rs 25 lakh crore belonging to Indians is estimated to be stashed away in Swiss Banks.We will do our utmost to bring this wealth back to India.SMS from L.K.Advani to voters
Hope is embedded in the first-of-itskind action seen in the US. Last September the UBS of Switzerland revealed to the US that it held 47,000 secret accounts for Americans but refused to disclose their identity. Last month, however, after being caught soliciting business, UBS agreed to reveal 250-300 clients and paid $780 million in fines.
The plea bargain was driven by desperation to avoid closure and international sanction. Pressure is mounting globally. British Prime Minister Gordon Brown and German Chancellor Angela Merkel have both stated that there was no place for tax havens . The days of bullet-proof confidentiality are clearly over and Advani's promise is based on this premise.
So, what is the quantum of Indian money in the Swiss banks? What is the source of the declaration of between $500 bn and $1,400 bn stashed in Swiss accounts ? First a perspective: $500 bn is India's GDP for six months and $1,400 bn would be India's GDP for a year and three months or five quarters.
Quote unquote
We raised the issue of money in Swiss banks in February and asked the Government to get it back.Advani has only followed it up. Prakash Karat, CPI(M) General Secretary What did they do for six years? Why was he silent as the leader of the Opposition for five years? It is a poll promise as they are short of issues. Kapil Sibal, Union Minister for Science and Technology A country-by-country breakdown of accounts in Die Banken in der Schweiz published by the Swiss National Bank (the Swiss central bank) in 2007 reveals assets belonging to Indian entities were worth only $2.5 bn or CHF2,923 million (Swiss Francs).
Swiss bankers also managed CHF1,383 mn ($1.2 bn) belonging to Indians in a fiduciary capacity. In fact, the total assets of all foreigners in Swiss banks is CHF2,070,437 million (or $1.8 trillion).
Contrast this with the range of $500 bn to $1.4 trillion of just Indian money stashed in Swiss banks as claimed by Team Advani.
Perhaps, money is hidden in custody accounts. By end-2008 the value of securities in these secret accounts of foreigners was CHF2,190 billion ($1.9 trillion). It is a moot point how much of this could be Indian money.
Quantum of money apart there is also the leverage factor. Does India have the kind of leverage US has? And mind you, the US government failed to get the UBS to spill out all the names.
As Kapil Sibal, a top lawyer and Union minister for science and technology, says, getting to the pot of money is a complex exercise as one has to first prove violations . Sibal also questions the timing of this idea. Why didn't they do anything when they were in power for six years? Why didn't Advani raise this issue in the past five years as the leader of the Opposition? If the issue is raised now after 11 years of silence, it is because they are short of poll issues.
There is, of course, no debate that Indians have stashed huge sums in overseas entities. The sources are unlimited from business to corruption to crime. Indians, without doubt, own a substantive stake in the $11-plus trillion stashed across the globe.
One route is overinvoicing of imports. India imported capital goods worth $45 billion last year, and officials believe, at least 10 per cent is siphoned and stashed abroad making India one of the top 10 countries with illicit outflows. This, though, is not the only route. The Satyam saga is validation of software exports being another route.
Over the years the adulterous politician-babu-corporate nexus has worked together to orchestrate the framing and changing of rules to suit end use.
The formula: to send money abroad inflate costs of goods or services sought abroad and to bring money back inflate income. Indeed, it is passe to stash in Swiss banks. Corporates now have legal ways and means to keep money outside India. FIIs, sub accounts and P-Notes are all part of the routing process and Cyprus, Singapore, Dubai, Mauritius are all new destinations.
None of these facts should detain Team Advani or the government of India from pursuing the idea. Hot pursuit of hot money is an idea whose time has come. India must take advantage (as it has indeed in the case of Liechtenstein's LGT Bank) of the emerging consensus across the globe against tax havens. But for rhetoric to translate into outcome it would also have to address issues at home. They would range from ending the abuse of double tax treaties to wiping out the P-Note and sub accounts culture. Very simply, the next political idea must be to dismantle the benami empires whether of dons, politicians
Loot vault
The amount of funds held offshore globally by individuals is about $11.5 trillion with a resulting annual loss of tax revenue of about $250 bn.
Tax Justice Network
Global proceeds from criminal activities, tax evasion and corruption is estimated at between $1 tn and $1.6 tn per year.
UN & amp; World Bank Report, 2007
During 2002-'06, $10 bn to $100 bn have been stolen out of India every year.
Global Financial Integrity Report, 2006
At least $6.2 trillion of wealth is held offshore, depriving developing countries of annual tax receipts of $64-124 bn.
Oxfam Study
India is estimated to have lost $5.2 bn just in taxes due to bilateral trade mispricing with the EU and US in 2005-'07.
Christian Aid

Source