The Union Home Minister and former Finance Minister claimed in a press meet his government has done more than the governments of the United States and United Kingdom in tracing resident money stashed away in Swiss banks. Rubbishing the Leader of the Opposition’s allegation on the government being soft on black money, he mused at how the information for such “political allegations” of black money not being targeted, ought not to be sourced from Wikipedia.
However, last week, the Government of India brought into effect a tax on withdrawal of cash from banks. This very government, in its early days, had introduced the tax in order to discourage cash-based transactions in the economy and to keep money within the banking system. Essentially, the new law entailed the imposition of a small tax on cash withdrawals of beyond a reasonable size.
With elections to the Lok Sabha having been declared, paving the way for electoral horse-trading, the same government, abolished the cash withdrawal tax with effect from April 1, 2009, with an eye on elections. A mutuality of interest across party lines will ensure that no serious objection is raised. With the path to political jockeying being made clear, the nation will have to brace itself for election results that threaten to potentially bring to power one of the biggest multi-party coalitions ever, with the only common ideology being the sharing of power.
Even in the era of Indian TV media’s carpet-bombing coverage and almost anyone being capable of “sting operations”, politicians are merrily seen on camera distributing cash during election campaigns. Stalin, the son and heir apparent of Tamil Nadu Chief Minister M Karunanidhi explained the footage of physical cash distribution by him as a mere act of pressing currency into the palms of infants — an Indian custom.
Not too long ago, newspapers, news websites and televisions channels across the world beamed unseemly visual footage from India, of Members of Parliament displaying wads of cash allegedly handed over to them as inducement of cross-voting in the vote of confidence over the Indo-US nuclear agreement. The allegations were denied, the government survived, and strangely, a television channel that had been part of the sting operation backed out citing lack of conclusive evidence.
The television channel was smart. Had it taken the risk of beaming footage of what it considered inconclusive evidence, it may have met the fate of Nimesh Kampani, a “powerful” Indian investment banker of international repute. Kampani invested his funds into the company that owns and operates Telugu newspaper Eenadu, and a slew of language television channels, although the Andhra Pradesh state government and the Centre had expressed its displeasure over Eenadu by systematically frustrating an investment proposal from global private equity major.
The investor being foreign, required approval from the Foreign Investment Promotion Board, which consistently refused to provide approval, and eventually gave approval for a size much smaller than the proposed deal size. Kampani being Indian, needed no approval from anyone in government, and boldly made the investment.
Soon thereafter, the Andhra Pradesh government went on to register complaints from depositors of Nagarjuna Finance, a non-banking finance company, which had defaulted in repayment of deposits. Not surprisingly, Kampani, who had been a non-executive director of the company, was targeted as a person responsible for the default in repayment of deposits. That he had quit from directorship of the company years before not only the default on deposits but also the enactment of the Andhra Pradesh law to criminalise such defaults, was no fetter for the abuse of state power.
Kampani was hounded, his arrest was sought and every layer of the court system in Andhra Pradesh refused to grant him anticipatory bail. The promoters, who controlled the defaulter firm, however, got bail. Last week, the Supreme Court stayed the proceedings in Andhra Pradesh. The Supreme Court is holding out as the last bastion of sanity.
Perhaps, the abolition of the cash withdrawal tax at such a crucial juncture would get stayed if challenged in courts. It is unclear how the measure is not violative of the Election Commission’s Code of Conduct for government during elections. The measure is blatantly at cross-purposes with the stated aim of preventing money laundering.
Meanwhile, the central legislation on anti-money laundering measures is being sought to be bolstered in a sweeping manner granting enormous powers to government to intrude into and impact private property. This legislation threatens to have all the portents found in similar laws which have spurred money laundering on the part of those who police economic legislation. One is really left wondering how India can ever claim to fare better than the United States and the United Kingdom in this space.
The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own
Tax experts say valuation of shares is a grey area and may lead to litigation
Says developments in construction technologies should make it possible for developers to bring down home prices