In my piece of 9 November (Time to honour black money pledge), I informed my readers of the Finance Ministry's reply to a Parliament Question on 8 July 2014 relating to government's efforts with Swiss authorities on the black money front. The Hon'ble Finance Minister, in his reply, elaborates his efforts under the Double Taxation Avoidance Agreement and its amendment Protocol that came into force on 07.10.2011.
This amendment is the grossest form of incompetence or a deliberate determination not to receive the names of the real criminals. Resorting to this document in preference to the only document which could and should have been used, namely, the United Nations Convention Against Corruption (UNCAC) is conclusive evidence to prove my charge. India ratified this Convention in May 2011, six years after signing it in December 2005.
This Convention contains an unconditional obligation of Mutual Legal Assistance which read as under:
"1. 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.
"2. Mutual legal assistance shall be afforded to the fullest extent possible under relevant laws, treaties, agreements and arrangements of the requested State Party with respect to investigations, prosecutions and judicial proceedings in relation to the offences for which a legal person may be held liable in accordance with article 26 of this Convention in the requesting State Party.
"3. Mutual legal assistance to be afforded in accordance with this article may be requested for any of the following purposes:
"(a) Taking evidence or statements from persons;
"(b) Effecting service of judicial documents;
"(c) Executing searches and seizures, and freezing;
"(d) Examining objects and sites;
"(e) Providing information, evidentiary items and expert evaluations;
"(f) Providing originals or certified copies of relevant documents and records, including government, bank, financial, corporate or business records;
"(g) Identifying or tracing proceeds of crime, property, instrumentalities or other things for evidentiary purposes;
"(h) Facilitating the voluntary appearance of persons in the requesting State Party;
"(i) Any other type of assistance that is not contrary to the domestic law of the requested State Party;
"(j) Identifying, freezing and tracing proceeds of crime in accordance with the provisions of chapter V of this Convention;
"(k) The recovery of assets, in accordance with the provisions of chapter V of this Convention.
"4. Without prejudice to domestic law, the competent authorities of a State Party may, without prior request, transmit information relating to criminal matters to a competent authority in another State Party where they believe that such information could assist the authority in undertaking or successfully concluding inquiries and criminal proceedings or could result in a request formulated by the latter State Party pursuant to this Convention."
The Convention also contains some vital provisions that can assist States which are serious about combating corruption and money laundering. Article 34 provides for States to annul or rescind a contract or withdraw a concession, if it is a consequence of corruption. Article 40 expressly provides that that every State Party "shall" ensure that there are "appropriate legal mechanism available within its legal domestic system to overcome obstacles that may arise out of application of bank secrecy laws".
Even, P. Chidambaram, then Finance Minister wrote to L.K. Advani, then Leader of the Opposition on 16.05.2008, that India has endorsed the OECD formulation regarding provisions for exchange of information to be incorporated in Double Taxation Avoidance Agreements, specifically providing that a country shall not be permitted to decline to supply information on grounds of bank secrecy. This admission must be regarded as brazenly misleading, coming from a minister whose actions continuously indicated acute anxiousness for not obtaining names of the real criminals.
Some leaders in Parliament, instead of invoking an International Convention, which destroys bank secrecy and promotes transparency, were keen to invoke the amended DTAA, particularly the one with Switzerland.
In September 2010, after L.K. Advani's query in Parliament on illegal account holders from Swiss banks, Finance Minister Pranab Mukherjee gave the following cryptic bizarre reply, "The Swiss do not give any information in respect of their banking transactions. Only once in 1945 they disclosed the assets of the Nazi leaders. Before and after they have not revealed any such information. This, (the DTAA) will provide us an opportunity to have the relevant bank information for tax purposes."
Well, not surprising at all, that Pranab Mukherjee also projected the DTAA as the most effective means of securing information, precisely because it was incapable of doing so. He had no compunction in admitting that the information received cannot even be given to the ED for a money laundering case. Successive ministers have continued this futile exercise, clearly for the same reasons.
Now, coming back to the amendment of the DTAA, I have also discussed this in an earlier article which appeared in Sunday Guardian, also reproduced in the book The Maverick Unchanged, Unrepentant at Page 199. A passage from it is reproduced below.
"The amended Double Taxation Avoidance Agreement came into force in October 2011 on completion of some internal procedures by the Swiss. The full text of the protocol is not easily available, however, a one page document describing the salient features of the protocol was circulated to both Houses of Indian Parliament without any question or discussion in the Upper House and some fleeting clarification in the Lower house. The salient features of this protocol are:
"1. Article on Exchange of Information has been amended to bring it in line with international standards.
"a. Under the current DTAA between India and Switzerland, India has not been able to obtain banking information from Switzerland. The protocol now seeks to amend the Article concerning Exchange of information to enable exchange of such information.
"b. Information which is foreseeable relevant for carrying out the provisions of this agreement or to the administration or enforcement of the domestic laws concerning taxes can be exchanged under the DTAA, whereas earlier information which was relevant only for carrying out the provisions of DTAA could be exchanged.
"c. Information exchanged is to be used for tax purposes only. However, the new Article also provides for use of information for such other purposes which are allowed under the laws of both states and the competent authority of the supplying state authorizes such use.
"d. There is a specific provision to ensure that information will be exchanged even if there is no domestic interest.
"e. There is a specific provision for providing banking and ownership information.
"f. The new provision will be applicable only for prospective information and not for past information."
I request my readers to carefully note the last point which completely stops us from demanding or receiving any information prior to 1 April 2012. In result, it provides complete secrecy and immunity to all offenders prior to that date, and every opportunity for round tripping their money. I can only describe this as one of the greatest frauds played on the nation by the UPA Government. As I have repeatedly stated, their intentions were concentrated only on creating insuperable obstacles for disclosure of identity of the Indian criminals, precisely because they were the very persons who controlled government. Those in the government who knowingly negotiated and signed this Protocol should be the first to be interrogated and made accountable. The active participation of the then government, silence of the Parliamentarians and the media must be questioned and condemned. I do not wish, at this stage, to name those collaborators against whom circumstantial evidence is more than sufficient to start a criminal investigation. But I must mention the name of Sonia Gandhi, whose late husband's Swiss deposit of $2.5 billion had been published in Schweizer Illustrierte's issue of 11 November 1991 in the august company of other corrupt third world politicians. Prestigious newspapers in the West are now proclaiming that she is richer than the Queen of England. Her possible involvement, and tactics on Manmohan Singh, now well documented, will also have to be dealt with by the SIT. After reprimand from the Apex Court, the UPA government gave the Supreme Court 26 names and documents of account holders in the Liechtenstein Bank in a sealed cover. One third of them had already been exonerated and the rest are small time offenders, who would, strictly speaking, not be subject to the DTAA, because it is nobody's case that they were being asked to pay tax on the same income in India and any European country. But most importantly, the notorious case of Hassan Ali of Pune will never appear in any list, because as a pure and simple criminal money laundering case, it will never attract the DTAA. As long as the Government of India continues to persist with the DTAA to repatriate our national wealth illegally laundered to offshore banks, it would only be confirming suspicions that like its predecessor government, it has no intentions of doing so. Firstly, the DTAA applies only to legitimate businesses that attract double taxation and not to money laundering; and secondly, even for tax evasion, it applies only to cases of April 2012 and thereafter. The government must use the United Nations Convention Against Corruption (UNCAC), show results, and restore the confidence of the people.