Case for amnesty scheme for black money abroad

The political climate has boiled to a point the entire political spectrum is committed to the people of India to bring back the black money illegally stashed away abroad by Indians. The Centre is making serious efforts in this direction mainly by amending the tax treaties between India and tax-haven countries where the black money is presumed to be kept.

The Centre is facing pressure from both the Opposition and Judiciary to act against those who have illegally stashed away illicit wealth in countries that have strict banking secrecy rules. In fact, a Public Interest Petition is also being heard by the Supreme Court these days where the Apex Court has taken this problem very seriously and has questioned the government by observing “it is a pure and simple theft of the national money. We are talking about mind-boggling crime. We are not on the niceties of various treaties”.

The amendment to tax-treaties generally relates to exchange of information between India and tax-haven countries. In this process the government expects to collect information on the Indian black money holders. The example of such amendment is a protocol signed with Switzerland in August, 2010. The protocol will enable India to access the accounts of Indian tax evaders maintained in the Swiss banks.

It is however, unfortunate that the Swiss protocol which was intended to take effect from January 1, 2011 has not entered into force till now. In fact as reported in the press on February 16, 2011, the Swiss Parliament is debating a treaty between India and Switzerland to pave the way for the Indian Authorities to seek details of illicit wealth stashed away in Swiss bank.

The limited steps taken by the Centre so far have been widely acclaimed by the public at large. The Centre has received confidential information about persons who have money abroad. It is curious to note that due to judicial pressure, the Govt. recently submitted to the Supreme Court a list of tax offenders — in a sealed envelop — who hold black money in foreign banks.

It is however, a bitter truth the exercise of bringing the money back is a time consuming exercise. It has taken over a decade for certain nations to unearth their black money abroad. In India also it will certainly take time. In the mean time the illicit money holders will get enough leverage and time to transfer their illegal funds from one country to other safe tax havens.

Therefore, it is the time now to strike hard. Howsoever strong the will to bring the black money back, the government will have to enact a suitable law to defeat the secrecy laws of tax-haven countries. Such a law has to be comprehensive and far reaching.

In the meantime, in view of the fact that black money might be transferred to safer tax havens, the Govt. should think of an amnesty scheme to provide a window of opportunity for black money culprits to bring the money back within a suitable grace period. Such money may be invested in specified instruments like infrastructure bonds after the due taxes have been paid on the money as per the amnesty scheme. If the money is not brought back within the moratorium period of, say three months, the govt should completely nationalise any fund kept abroad as per the suitable law to be enacted.

It is also felt the amnesty scheme should be limited to those funds only which have been accumulated by evading the due taxes in India. Therefore, wherever the money lying abroad is linked to criminal activities like corruption, fraud, cheating, drugs, terrorism, etc. the Govt. should take suitable criminal action against the offender.

Let the amnesty be for tax offenders, not for criminals.

The author is a Sr. Partner in S S Kothari Mehta & Co

Email: hp.agrawal@sskmin.com