Open routes to catch tax cheats

The front page of The Sunday Guardian on 02.11.2014 carried a piece with the headline predicting Prime Minister Narendra Modi's victory over the "Swiss Club" (Officials confident PM Modi will prevail over 'Swiss Club'). This information appears to be sourced from some reliable and honest bureaucrats whom the reporter described as "Officials eager to actualise Prime Minister Narendra Modi's vow of the return to legal channels of an estimated $500 billion-plus held illegally by Indian nationals and their nominees abroad", who also warned that a secret "Swiss Club", a coalition comprising corrupt officials, businesspersons, some lawyers and politicians, are working hard to ensure the failure of the PM's mission to repatriate India's black money. I found full comfort in the Prime Minister's words on the radio that unequivocally renewed his assurance to the nation that every rupee stolen from India would be repatriated. The PM's words were a slap on the face of the "Swiss Club".

I would like to share some preliminary suggestions to quicken the pace of the Special Investigation Team (SIT) operations. The chairman and vice chairman have always taken notice of constructive suggestions, for which I am deeply grateful to them.

After the frivolous application filed by the Union of India (UOI) before the Supreme Court, seeking recall of its order for setting up a SIT for probing black money cases, was dismissed on 26.03.2014, I addressed a letter to the UOI on 08.05.2014, asking for information about correspondence on the subject, to which I was entitled by order of the Supreme Court. In their reply dated 27.05.2014, the Solicitor General of India admitted that the UOI had addressed a letter dated 27.02.2008 to the German authorities, which started a long series of correspondence, ending with a letter from the German government dated 18.03.2009.

These letters, 17 in all, have been provided to me only after the recent Supreme Court hearing. In each one of them, the names of the addressees and of the signatories have been blacked out, in addition to considerable content. This is nothing but forgery punishable under the Indian Penal Code. An inquiry should be ordered as to who authorised these forgeries and for what reason, and the relevant files with notings should immediately be seized. A simple interrogation of the file handlers would reveal incriminating evidence against the offenders.

What is clear, even in the blacked out letters given to me, is that from the very first letter written by Government of India on 27.02.2008, only names of Indian taxpayers were asked for, thereby confirming that it was the UPA government that invoked the Double Taxation Avoidance Agreement (DTAA) and not the German government. It is also amply clear from the German response of 17.03.2008 that this correspondence was taking place under DTAA. The objective of the UPA government was obfuscation and derailment, and buying time by keeping the German government engaged in gathering information about Indian taxpayers who were involved.

However, it has not been denied by either by the Indian or German governments that the offer of the German government contained in the public statement of Torsten Albig, unequivocally offered sharing of information at no cost or condition to any requesting country. The German government did not speak of any confidentiality or the rights of privacy of the criminals which the Finance Ministry wanted to protect by their sordid move in the Supreme Court.

It is also clear from the correspondence that there have been some telephonic contacts between bureaucrats in India and their counterparts in Germany and the invocation of DTAA on our part has been settled by cooperation from some German friends. There is involvement of the Indian ambassador in Germany, and she/he too must be interrogated.

In the communication dated 16.05.2008 to L.K. Advani, the Leader of Opposition (Lok Sabha), the Indian Finance Minister, P. Chidambaram concedes that in the very first letter his government had asked for information only in relation to Indian taxpayers. No wonder they were in touch only with the tax authorities of Germany and not the competent authorities under the United Nations Convention Against Corruption (UNCAC). Fortunately (though foolishly), he concedes that it had been agreed that bank secrecy will not be pleaded by either country to decline giving of information. This shows that the Germans were already acting on Article 46 particularly paragraph 8 of UNCAC which expressly provides "States Parties shall not decline to render mutual legal assistance pursuant to this article on the ground of bank secrecy."

This Convention contains an unconditional obligation of Mutual Legal Assistance in other paragraphs of the Article which read as under:

"States Parties shall afford one another the widest measure of mutual legal assistance in investigations, prosecutions and judicial proceedings in relation to the offences covered by this Convention.

"Mutual legal assistance to be afforded in accordance with this Article may be requested interalia for any of the following purposes:

"(i) Executing searches and seizures, and freezing;

"(ii) Identifying or tracing proceeds of crime, property, instrumentalities or other things for evidentiary purposes;

"(iii) Identifying, freezing and tracing proceeds of crime in accordance with the provisions of chapter V of this Convention;

"(iv) The recovery of assets, in accordance with the provisions of chapter V of this Convention."

It is not necessary to reproduce in this piece the other paragraphs of this Article.

Let me now dispose of an effort by the present Government of India, acting through the Ministry of Finance and the Attorney General, to completely frustrate the Prime Minister's pledge to the people of India; a pledge which he categorically reiterated to the entire nation after the Finance Ministry's subterfuge was frustrated by the Hon'ble Supreme Court on the morning of 29.10.2014.

This is what the subterfuge was. The Finance Ministry's petition pleaded that an Inter Governmental Agreement with the US for purposes of automatic exchange of information was being negotiated, but it cannot be entered into without preserving the confidentiality provisions of DTAA between India and the US contained in Article 28 (1) of the agreement. Yet another red herring.

I have repeatedly explained that the DTAA does not apply to money launderers and criminals who have stashed their black money secretly in tax havens abroad. It only applies to honest businessmen, who, by the law of more than one country, are liable to pay tax in more than one country on the same income. In any event, an agreement for automatic exchange of information will also be part of DTAA and therefore inapplicable to the cases in hand.

Let me tell you how the Americans dealt with the names they received from the Germans. This has been described in the following words by the BJP task force in their report of January 2011:

"Global campaign against Tax Havens: US officials have tried to crack down on this off-shore tax abuse at least since 1961, when President Kennedy asked Congress for legislation to drive these Tax havens 'out of existence'. [Users of Tax Havens beaten by Political Gale — New York Times 26th Feb 1961]. The US Government as well its Congress are most concerned about these tax havens due to the severe economic crisis faced by the country and also due to pressure from sections of economists etc to 'clean up' the global financial system. There are also concerns regarding the financing of terror groups by some of the tainted money from tax havens. How seriously countries like the US have taken up the issue of under-the-ground economy, which undermines the over-the-ground economy, can be judged by how they are preparing to tackle and tracking this evil money...

"The US coerced and threatened the UBS to cough out the details: Under pressure from federal authorities, the Swiss bank UBS is closing the hidden offshore accounts of its well-heeled American clients, potentially allowing their secrets to spill into the open. In a step that would have once been unthinkable in the rarefied world of Swiss banking, UBS has agreed to shut about 19,000 accounts that prosecutors suspect have gone undeclared to the US Internal Revenue Service.

"Under sheer geo-political pressure and coercive national measures taken by USA, UBS — the largest Banking Institution from Switzerland — has also committed to provide names of top 250 persons who have kept money in offshore account out of 19,000 accounts mentioned earlier, to US authorities. UBS has also originally committed to pay a fine of USD 780 million to settle claims that it has abetted in defrauding US Internal Revenue service."

Several UBS bankers in the US were arrested and released on bail after they disclosed the names and agreed not to leave the country without every week supplying more names, which they did.

The Americans have recovered billions of dollars, both as fines from UBS, and from illegal accounts, but our government is providing free legal assistance to felons who ought to be in jail.

By even suggesting to the Hon'ble Supreme Court that the Americans insist on confidentiality, the Finance Ministry and Attorney General have misled the Prime Minister and the Indian nation.

Wait for more, my readers!