http://www.lkadvani.in/eng/content/view/827/281/
A BJP Background Paper
BJP commits to bring back lakhs of crores of stolen Indian wealth hidden in secret accounts in Swiss Banks and other Tax Havens. These billions of dollars belong to the people of India – the farmers, landless, workers and the rest who are under great economic stress today.
The dynastic congress party rule and the political culture it had institutionalized since Independence had led to unchecked growth of black money and bribery at all levels in India including at the highest. The black economy in India is estimated at half as much as the reported economy in size. But a large part of the black money generated in India or elsewhere by Indians has been taken or kept outside India. It is known for long that many in business keep their illicit money in secret bank accounts in Switzerland and other tax-free territories known as 'tax havens'. Later, underworld actors and corrupt politicians too began stashing away their illegitimate money in secret bank accounts and tax havens.
Illicit global money in Swiss banks
The vaults of Swiss banks hidden in secrecy are known to hoard the illegitimate monies of tax-evaders, criminals and the corrupt. The extent of illicit money lodged in Swiss banks is mind-boggling. In the year 2001 the estimated illicit funds in Swiss banks, according to the open Wikipedia encyclopedia totalled USD 2.6 trillions [Rs 130 lakh crores in today's value]. This seems to have risen to USD 5.7 trillions [Rs 285 lakh crores] – showing a rise of 80% in six years.
Staggering sums of Indian black money in Swiss banks
While this is the total illicit money stashed away in Swiss banks, the share of buccaneers in India in this global loot has been a subject of debate. The estimated illicit monies deposited by Indians ranges between $500 billion to $ 1400 billion. This ranges from three to ten times India's overseas debt and 50% to 120% of the nation's GDP. This can be used to put in some Rs 50,000 to Rs 140,000 in the pockets of 50 crore Indians! What a transformation it can make to the ordinary and poor Indian lives?
We need to recognize that we are the youngest and most youthful nation in the world. Undeniably the future of our children and youth are the responsibility of the present generation. Statistical data [as of 2006] shows that out of our total population, the demographic profile of nearly 48 crore is less than 20 years. Even a part of the money hidden in secrecy abroad can take care of education, and health care needs of massive youth population of our country. It can also take care of the investment needs of the enterprising youth of India as a large number of them will be entrepreneurs in country which, the Global Entrepreneur Monitor Study has established, as the second most entrepreneurial nation with 18% of its population in the age group of 16 to 64 being entrepreneurs and this takes India ahead of China and the US. Even if a part of this amount is brought back into the country, India will be the most powerful economy in the world. The billions of dollars stashed away abroad is the money belonging the people of India – the farmers, the workers and the rest who are under great economic stress today.
Convergence of corruption, crime and venal business:
The illicit funds kept by Indian nationals in Swiss secret bank account are no secret after all. It is well-acknowledged in the public domain. In a press conference to commemorate the 60 years of Indo-Swiss Friendship Treaty, the Swiss Ambassador to India said "Switzerland was accused of giving shelter to black money and there has been a lot of inflow of such wealth from India and other countries of the world". He added, "I would not say it would be stopped 100 per cent (under a new law). But through this measure, it would be controlled up to a certain limit." [NDTV Profit dated 15-03-2008].
While Indian businessmen and professionals visit Switzerland very often, even Indian politicians keep visiting Switzerland and some ministers do it as the personal leg of their official tour. Sometime last year the media reported that ministers of the UPA government had not submitted their tour reports giving the details of the countries they had visited. The media also reported that as part of their official trips to various countries in Europe and Middle East, some ministers have made “private” or “personal trips” to many tax heavens and “the reports on these trips have also not been provided to the PMO”. The India traffic to Zurich, the financial centre of Switzerland, is seen to be believed. Not surprisingly Zurich is the only European town which has Hindi slogans written on either the side of its trams!
The issue of Indian money stashed away abroad seems a mix of political bribes, crime money and venal business. The issue has been in the public domain for a long time and it is one of the grave concerns of average Indians. But it was true that Indian government acting singly could not have done much to break into the secret accounts of Indians in Switzerland. But the situation in the West is changing rapidly and powerful nations in the West are now seeking to break open the secrecy of the Swiss banking system.
The Western nations have begun a crusade against banking secrecy
The western nations had for long winked at the huge illicit money getting hoarded in Swiss banks. In the past that did not hurt them. But, with the global, particularly the Western, financial system virtually threatening to collapse now thanks to the lack of transparency in banking, global opinion is drastically changing against secret banking and tax havens. France, Germany, England and the USA are leading the charge and have begun campaigning against secret banking and tax shelters. Such powerful political leaders as the French President Nicolas Sarkozy, the German Chancellor Angela Merkel, and the British Prime Minister Gordon Brown have joined forces with the US President Barack Obama in the battle against tax havens and “set their sights squarely on Switzerland”, reports De Spiegel magazine from Germany. The Western media is full of news and comments on this new development against Switzerland.
Undoubtedly the lack of transparency in the banking sector that led to banking and financial meltdown exerted pressure on the West to prise open the secret Swiss banks and tax havens. According to De Spiegel “cash strapped governments around the world see the opportunity to finally put an end to banking secrecy to gain access to information about tax evaders who had hidden their assets in Switzerland”.
The Liechtenstein LTG bank issue
It all started with a tax probe by German intelligence which broke open the secrecy of LTG bank owned by the family of the prince of Liechtenstein. The German government took the extraordinary step of paying DM 6 million to an informer in LTG bank who parted with a CD containing the names of 1400 secret deposit holders in that bank. Of this some 600 names belonged to Germany. And the rest to other countries. Following upon this the Germany tax enforcement conducted raids from February 2008. This became a diplomatic issue between Liechtenstein which is a principality and Germany. Soon thereafter Germany began a campaign against tax havens in general and Switzerland in particular.
The West turns Switzerland untouchable; and Switzerland wilts
Things began to gather pace from then on. Opinion against secrecy in banks and tax havens has grown rapidly in the West and today the Western establishment sees Swiss banking model as virtually an evil. Our target is the funds of India kept in these places and that is critical to us rather the nuances of the nature of Tax havens in relation to the west.
It is important to note the following fast paced developments which have taken place recently.
• In the third quarter of 2008 the Organization for Economic Co-operation and Development [OECD] of which Switzerland is one of the 17 members threatened to blacklist Switzerland for protecting tax evaders.
• In the preparatory meeting held early in February 2009 at Berlin for the April summit of G20 nations, which includes India, European leaders vowed to launch a crusade against tax havens at the G20 summit. They also hinted at sanctions to “punish the non-cooperative tax havens”. They were reported to have prepared a list of some 30 such tax shelters and secret havens which they want to name at the summit.
• When a Switzerland stunned at this development made a request that it be given an opportunity to present its case at the G20 summit, in an extraordinary show of toughness, they have bluntly rejected that request.
• A week later on February 18, the largest Swiss bank UBS was forced by the tax administration in US to reveal the names of some 300 presumed tax evaders to the US. The US threatened to sue the UBS and fearing that would lead to the demise of the bank; the Swiss authorities invoked an emergency clause in their banking law and gave the data to the US before the Swiss Federal Court, which was moved by the account holders, could stop it.
• Forthwith and in less than a week, the Obama Administration announced a statute to uncover all secretive tax havens including the Switzerland.
• The sudden explosion of indignation and anger against banking secrecy and the illegitimate money it breeds and protects seem to have shaken the Swiss government. While, in the past, Swiss government used to stress that bank's secrecy was “non-negotiable” it is no more able to maintain that stand. It has now acknowledged that it would have to “compromise”. The foreign and justice ministers of Switzerland have hinted that it would have to give up its protection to foreign tax evaders. Swiss government has also indicated that it would change its present law that regards tax evasion as a 'civil offence' and make it a 'criminal offence'. We in India know; how the Swiss laws were used to manipulate and cover up in the Bofors case.
The British Prime Minister Gordon Brown, who was severely criticized for not immediately supporting Germany and France, who had taken positions against banking secrecy in the Berlin preparatory meet, soon came out and supported the move against tax havens and banking secrecy while addressing the US Congress later in February.
India is stunningly silent on the G20 move
But, in contrast, twice in the last one year, India has shown marked disinclination to get the facts about illicit money kept by Indian nationals in secret Swiss bank accounts and to strive to get back the Indian wealth hoarded in Swiss banks.
First when things are moving so fast and the very western nations which had once encouraged the Swiss bank secrecy are now taking on secret banking, the Indian representative, who attended the G20 preparatory meeting at Berlin, did not utter a word of support for the move at the meeting. It is now almost a month since the Berlin preparatory meet and one of the most important agenda for the G20 summit is the issue of tax havens and banking secrecy and yet the Indian Prime Minister is maintaining deafening silence on the issue. Considering the enormous Indian monies believed to be hoarded in secret accounts in Switzerland, the Indian government is duty bound to support the move to unlock the banking secrecy and take a proactive position.
India also does not ask the German government for the names of Indians in the Liechtenstein bank secret records
Earlier when the Germany had obtained the LTG secret bank account, its finance ministry spokesperson Thorstein Albig indicated that Germany would positively respond to requests from any country for the secret information relating to its nationals and provide it free of cost. Finland, Sweden and Norway forthwith expressed interest in the data obtained by the Berlin intelligent agency. But despite the fact that the LTG bank secret CD reportedly contained some 100 Indian names, India did not make any such specific request. As the Leader of the Opposition I had written to the Prime Minister asking him to make a specific request to the German government for details. In response to my letter to the Prime Minister, Shri Chidambaram wrote to me saying that the Indian government had indeed asked Germany for details of tax evasion by Indian nationals. I now understand that this was not a specific request to Germany part with the banking secrets concerning Indians contained in the CD secured by the Germany government, but a routine question under the taxation agreements with different countries. Commenting on India's ambivalence, Transparency International (TI) says India has maintained “a stoic silence over the issue and has not approached the German government for this data’’ [Economic Times 25.5.2008].
Thus the UPA government has not demonstrated its keenness to get the Indian wealth illegally stashed away in Swiss secret banks accounts. On the contrary, the government's silence seems to imply its keenness to allow the corrupt and the criminal to continue to keep hoarded their illicit wealth in secrecy. This leads to the inevitable inference that the government is keen to protect some in its hierarchy the disclosure of whose secrecy might harm the ruling establishment or the dynastic family itself as in the case of the Bofors scam. The conduct of the government is in direct contrast to the indignation that drives the Western powers to break open the secret walls of the Swiss banks.
The BJP's commitment to the people of India – we will bring back Indian wealth stashed away abroad
1. The BJP sees in secret banking the RDX that has the potential not only to blow up national financial systems and economies but also to support and fund the Jihadi terror whose attacks on India has become unfailingly regular during the UPA regime. Terror gets funded through secret, not transparent, channels. The secret bank accounts offer the best and the most convenient instrument for financing secret operations including terror. Last year the Indian National Security Advisor had said that stock market had become a vehicle for routing and funding terror in India. What he had in mind was the Participatory Note [PN] mechanism for investment of undisclosed funds from abroad in Indian stock markets. This is the mechanism by which a permitted Foreign Investment Institution [FII] is allowed to invest in its own name the funds of persons whose identity is not disclosed by it to the Indian authorities. The PN mechanism was introduced when India was desperately in need of forex inflow. It should have been suspended once the forex position became comfortable. But, the UPA government continued to permit this mode of investment even after it had grown to alarming proportions. The PN route played a marginal role in the investment before the advent of the UPA.
2. But after the UPA assumed power, there was a stunning growth in the investment in stock markets through the PN route. Suddenly the PN became the most preferred instrument and the largest investment from abroad in stock market was routed through the PN route. The amount invested through PN in Indian stock market increased by several times after the UPA government assumed office. The notional value of investment in PNs which aggregated to Rs.31, 875 crores in over 10 years up to March 2004 grew to Rs.3,53,484 crores by August 2007 – that is by over 11 times in just 40 months! The investment through PN constituted 20% of all FII investment in 2004. This increased to over 51.6% in August 2007. This data available in SEBI Website. Thus in 2007 more than half the FII investments were through the anonymous PN formula. The sub-accounts created by the FII for these nameless entities not registered with SEBI to transact in the market are fraught with dangerous consequences and security risk. The sources of these funds are unknown; the investors are nameless; the billions of dollars invested through PNs are address-less. The “Know Your Customer” norms, which the law makes it mandatory for opening of simple banks accounts by Indians in India, are not followed to permit billions of Dollars of investment into the stocks markets in India. The PN mechanism – through which unnamed investors are allowed to participate in our markets, invest and disinvest stocks for billions of dollars and make and repatriate profits – is thus a mystery wrapped in a puzzle, packed in an enigma, crammed inside a conundrum and delivered through a riddle. The clamour for this form of investment is intriguing if not outright suspicious. It was felt by many experts that PN’s are the weapons of Mass Destruction –WMD-- of our stock markets. Actually SEBI has proposed that foreign institutional investors and their sub-accounts not be allowed to issue or renew offshore derivative instruments. It also wanted them to wind up their current positions over the next 18 months but these restrictions were revoked under pressure from the Central Government. The Indian attitude to this serious issue is a contrast to how the US handles it for instance. The UBS which paid a penalty of over $800 millions in US just now and also disclosed the secret account details of 300 Americans as the US government wanted. But in India the same UBS paid a paltry penalty a few lacs to the SEBI for not – yes for NOT – disclosing the names of the secret PN holders whose funds it had invested, and settled the case, just couple of weeks back!
3. There is genuine apprehension that the PN mechanism has been and is being exploited for investing the illicit funds of Indian business and politicians back in to India and along with it for smuggling in and keep invested terror funds in the stock markets to grow it at a high profit! The BJP recalls here the Vohra Committee which had reported there is nexus between crime and political personalities is also reported to have named the crime-linked political personalities. The basis of any such nexus is only secret money. So the issue of illegitimate is inextricably mixed with terror, crime, politics and secret banking.
Therefore, regardless of what the UPA government does or does not do, the BJP is making a solemn commitment to the people of India that if the NDA gets the majority in the ensuing Lok Sabha elections, it would join India in the global effort to put an end to banking secrecy and intensify it by every means – diplomatic, political and economic – to get back the real Sovereign Wealth of our country. This commitment will figure prominently in the election manifesto of the BJP and also of the NDA. The BJP will not merely rely on the state power to achieve this end but also intensely and actively educate the public opinion on this issue and take the issue to the masses and create intense public pressure on the system to uncover this nexus between secret foreign money, terror, and politics.
The BJP campaign for public education to exert pressure on the system to get the Indian wealth back
The BJP is aware that the process to recover the illegitimate monies kept abroad can be time consuming. But it has been successfully demonstrated by the countries which had attempted to recover the assets stashed abroad by their corrupt leaders and businessmen, that it can be accomplished, like as under:
• Philippines slogged for 18 years but finally successfully got repatriated the bribe money of its former President Ferdinand Marcos [$624 million] held in Swiss Bank accounts.
• Between 2001-2004, Peru recovered $180 million stashed away in tax havens by Vladimiro Montesinos.
• Between 2005-2006, Nigeria recovered USD 505 million of the Sani Abacha money frozen and forfeited by Swiss authorities.
But if India joins the move by the OECD and G20 nations and the US and UK and if gets a convention signed by the G20 with the different tax havens, particularly Switzerland, then the recovery process can be much shorter and successful on a large scale.
While this will be BJP's global strategy against illicit Indian money abroad, within India the BJP will undertake a multi-pronged campaign to educate and mould public opinion on the issue as part of its election campaign. Some salient features of the BJP campaign are:
1. The Bharatiya Janata Party will take the issue of Indian money in secret banks abroad to the people of India, and will conduct mass public opinion polls on April 6, 2009 which is the day the BJP was born;
2. The Chief Ministers of the NDA ruled States would write to the Prime Minister asking him to write to the German government for the details of the Indian names revealed in the LTG bank secret papers available with the German government and also on what response the government had got to the letter the Finance Ministry is purported to have written to Germany;
3. The Chief Ministers would also ask the Prime Minister to help in getting the names of the persons from their State who have kept undisclosed monies abroad since it is a huge loss to the state exchequer in the form of different types of taxes;
The BJP has approached experts in law, accounting, management and intelligence to prepare a strategic document for India to enable the country to get back the national wealth stashed away illegally by the corrupt politicians, venal businessmen and criminal overlords. This initiative we feel is important in the national interest and it is above partisan political considerations. We plan to request experts to formulate a plan for taking the task forward. Shri S. Gurumurthy, well-known chartered accountant, corporate advisor and also a popular writer specializing in investigative journalism, Dr. R. Vaidyanathan Professor of Finance at Indian Institute of Management Bangalore who has done extensive work on terror funding and also a well-known writer on economic issues, Shri Mahesh Jethmalani, a well-known senior lawyer and Shri Ajit Doval a well-known intelligence expert, have agreed to work voluntarily in this task force to carry forward this national endeavour.
The BJP is thus seriously committed to do everything outside India to ensure that the opinion evolving in the world against illicit money, secret banking and tax havens intensifies and support it in every way to put an end to the evil of secret banking and illicit money at the global level as well as generate massive public opinion within the country to exert pressure on the system to bring the Indian wealth stashed away abroad in secret banks and tax havens.
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