Getting India’s money back from Tax Havens
Congress caught in its own web
Stupefied by the strong endorsement all across the country to the demand that the money looted from India must be brought back, the Congress has tied itself in knots.
Its spokesmen have given five reactions:
• Why is Mr. Advani taking up this matter now, on the eve of elections?
• The GE-20 meeting was not the proper forum for taking up the issue.
• There is doubt about the figures.
• Why did the BJP government replace FERA by FEMA, and thereby make the offences compoundable?
• Is Mr. Advani not unwittingly alerting those with illegal money abroad to spirit it away from Switzerland to other tax havens?
• What was the NDA doing when it was in office? In any case, there is doubt about the figures.
The reactions betray panic as even the littlest reflection would have shown them to be indefensible.
• “Why is Mr. Advani taking up this matter now, on the eve of elections?”
The fact, of course, is that Advaniji took up the matter with the Prime Minister in April last year by writing to him. The reply that the then Finance Minister sent him showed that the Government intended to do little except keep going through the pretence of taking some steps. Soon thereafter, we were alarmed to learn that a senior official of the Finance Ministry had written to the then Indian Ambassador in Germany not to press the Germans for release of the names of Indians in the list that they had obtained from Liechtenstein — lest the Germans take offence and conclude that they were being pressurized and their bona fides were being questioned. [This information was later confirmed by the Indian Express in the report it published on 31 March 2009.]
Why now? The answer is that a unique opportunity has arisen only now, after western economies have found themselves in a severe crisis. The crisis has forced countries like Germany, France, USA and UK to take the leadership role in G-20 and pledge to get their stolen wealth back from tax havens. The BJP believes that this is the right time for India to join the global effort to get its own stolen wealth back.
• “The G-20 meeting was not the proper forum for taking up the issue.”
This customarily self-serving rationalization was put out by one of the Congress party’s lawyers and spokesmen. At the same time, the party was trying to insinuate that, actually speaking, the Prime Minister had taken up the matter at the G-20 Summit. As its spokesmen could not point to any statement he made either at the Summit itself or even at the press meet he held after the Summit, they drew solace from a passing reference to the matter in the speech he had made at the dinner hosted by Mr. Gordon Brown, the British Prime Minister.
In any case, if the G-20 Summit was not the right forum for taking up this matter, how is it that in the communiqué that the G-20 leaders issued on 2 April 2009, they said, in paragraph 15, on “Strengthening the Financial System,” that they pledged themselves “to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information”?
Were they also, in the view of the Congress party, acting inappropriately when they made such a strong commitment in their communiqué at the Summit?
• “In any case, there is doubt about the figures”.
As is its custom, the Congress is trying to cover up the basic question of money which has been looted from India and is lying in tax havens, by raising questions about the precision of figures and estimates. This is quite the kind of legalism with which persons like Mr. P. Chidambaram and other legitimizers tried to cover up the loot from Bofors.
The OECD itself has stated in accounts published in early April 2009 that there are $1.7 trillion to $11.5 trillion, which are today parked in tax havens. This estimate of the OECD has been widely reported in the Indian press. The basic point is: even if the amounts are just scores of billion dollars and not one and a half trillion dollars, why should they not be brought back to India? And can they be brought back to India when the attitude of the government continues to be as determinedly inactive as that of the present Government?
Can the Government which allowed Ottavio Quattrochi, the Italian power-broker who is the main accused in the Bofors scam, to take his money out of banks after it had been frozen be trusted to bring back the loot that is lying in Swiss banks and other tax havens? Can the Government which prostituted the CBI so that he may get away from Argentina be trusted to bring the loot back?
• “Why did the BJP government to replace FERA by FEMA, and thereby make the offences compoundable?”
Again, the Congress is relying on the short memory of its audience. The fact of the matter is that no one had been pressing more for the replacement of the harsh provisions of FERA than the Congress itself. The changes were being contemplated since 1996. The demand for doing away with the harsh provisions came to a crescendo during the Government of Mr. VP Singh when FERA came to be used for interrogating captains of industry under harsh circumstances. As news reports of that period themselves indicate, FEMA which was approved by the Government in July 1998, was on the lines of a draft which had been prepared under the leadership of the preceding finance minister, Mr. P. Chidambaram.
The reasons for changing the law are well set out in the following passage:
“Until recently, we had a law known as the Foreign Exchange (Regulation) Act. Its object was to conserve and augment the forex reserves of the country. The way to hell, it is said, is paved with good intentions. Like many well-intentioned laws, FERA paved the way to disaster. FERA created a flourishing black market in foreign exchange. It brought into the economic lexicon the word ‘Hawala’. Illegal forex transactions became the fuel for the growth of crime syndicates with trans-border connections.
“FERA also became a tool of oppression. Successive governments persisted with FERA and added COFFEPOSA and SAFEMA. International markets do not respect draconian laws that run counter to common sense. India’s reserves, far from being augmented, dwindled at an alarming rate… Mercifully, FERA was buried finally on May 31, 2000.”
The author? None other than P. Chidambaram, in the article he contributed to the Indian Express on 25 August 2002!
• “Is Mr. Advani not unwittingly alerting those with illegal money abroad to spirit it away from Switzerland to other tax havens?”
Another clever little statement by yet another lawyer of the Congress party! Would the looters who’ve stashed away money in tax havens from India still need to be alerted after Germany got the names from Liechtenstein as long ago as last year? Would they still need to be alerted after Germany offered to furnish the names to governments that asked for the names? Would they still need to be alerted after the United States got the names from the leading bank of Switzerland, UBS in February this year? Would they still need to be alerted after the G-20 leaders, including Dr Man Mohan Singh as the Congress would like us to believe, declared their determination to get the tax havens to disgorge the names? But such is the confusion in the Congress party and such the brilliance of its lawyers that all it can do is to seek to deflect the nation-wide demand for getting the loot back from tax havens by such witticisms!
• “What was the NDA doing when it was in office? In any case there is doubt about the figures.”
Leaders of the Congress party would be better advised to ask, “During that very period, what was the Congress party doing, what were its lawyers and leaders doing, to thwart the efforts of the NDA Government to uncover the names of persons who had looted the country even on defence deals like Bofors?”
Even while replacing FERA by FEMA, the NDA Government made sure that it would have an additional two years to files prosecutions under FERA. And it filed as many as 2000 cases against those who were under investigation before FERA lapsed. The reason for doing so, a reason that is well known to lawyers in the Congress party, was that, when a prosecution is filed it is adjudicated according to the law which prevailed at the time at which the case was filed. These are the very cases which the Congress later on did not pursue.
There is a real fight ahead: a fight in the national interest, a fight that will have to be waged doggedly to get the names from the tax havens and to get the amounts back to India.
As Mr. Advani has emphasized, a consensus is already emerging across the country. Leaders outside the political realm, parties such as the JD(U), AIADMK, CPI(M), SP and BSP have all demanded that the Government act energetically to get the names from the tax havens and to get back the amounts. Instead of quibbling, the Congress would be well-advised to explain why it has not taken any action since even the German Government had offered to furnish the names that it had obtained on its own.
Even now, Mr. Advani has urged, all parties, including the Congress, to get together and strive towards this objective.
That is an objective that the NDA will most determinedly pursue once it is voted to office.