Developed nations reluctant to root out black money, says India Legal article

New Delhi : Despite all international posturing on the need to take action against existing tax havens around the world, developed nations are reluctant to root out the menace of black money, claims an article appearing in the fortnightly ‘India Legal’ magazine.

The article quotes Professor Jason Hickel of the London School of Economics (LSE), as saying that tax havens “collectively hide one-sixth of the world’s private wealth.”

The article further quotes Professor Hickel, as saying that “financial markets the world over thrive on hot money or on funds transferred from one country to another for short-term profits. The flow of capital from tax havens is a major source of financial infusions into stock markets, bet it in India or in the United States.”

The ‘India Legal’ article also quotes an unidentified official in the know of the earlier crackdowns on black money, as saying that the “root of the problem is that big international banks and financial institutions thrive on funds from tax havens.”

Commenting on the sensational revelations of financial fraud in what has come to be known as the “Panama Papers”, a revenue intelligence official told the fortnightly, “If the investigations have to make any headway, they will have to examine the method employed to take the money out of India – was it through Hawala, or through over-and-under invoicing of exports or imports?”

He further warned, “It will be a tedious and long-drawn-out process at best. Tracing the paper trail will not be easy, since tax havens are interlinked and the money is often parked in one under one name, and then routed to another in an entirely new account in a new name.”

“To add to the confusion, there are also genuine or legally tenable cases of firms opening offices and accounts in Panama or Mauritius..If someone says that his or her name has been misused, the trail will go cold. It may make news, but without proper documentation, the case will fall flat. To source documents in this case would be difficult,” the unnamed official told ‘India Legal’.

Some of the prominent Indians whose names figure in the so-called ‘Panama Papers’ include Supreme Court lawyer Harish Salve, veteran film actor Amitabh Bachchan and his actress daughter-in-law Aishwarya Rai Bachchan,India Bulls owner Sameer Gehlaut, DLF promoter K. P. Singh and Adani Group chairman Gautam Adani.

The initial reaction of the NDA government to these disclosures has been to set up a team of experts to investigate the Panamanian link. The experts have been drawn from different arms of financial intelligence, the income tax department and the Reserve Bank of India (RBI), and they have been directed to fast track their probe and report directly to Prime Minister Narendra Modi.

Finance Minister Arun Jaitley has promised an “impartial multi-agency probe” and predicted that the opposition Congress party may not have many reasons to celebrate once the revelations appear in the public domain.

Expert on black money and former Jawaharlal Nehru University (JNU) professor Arun Kumar was quoted by ‘India Legal’, as saying, “The very financial architecture of the world is driven by money that flows in from tax havens. The big countries and their governments are involved.”

He was further quoted, as saying that, “Disturbing this architecture may not be easy, since it has the tacit support of the richer nations and their governments.”

The fortnightly concludes by saying that should the Indian government opt to act firmly on the issue of black money being parked in tax havens, it will face enormous global pressure, especially when the larger deals surface and come into focus, and adds that domestic considerations will also have to be taken note of. (ANI)