Black money a dark alley
Politicians make tall promises ahead of polls, but the latest vow from the BJP to bring back illicit money stashed away in Swiss banks stands out for trivialising a serious issue. Recovering stashed funds from tax havens is easier said than done, reports Rajesh Mahapatra.delhi Updated: Apr 22, 2009 02:13 IST
Politicians make tall promises ahead of polls, but the latest vow from the BJP to bring back illicit money stashed away in Swiss banks stands out for trivialising a serious issue.
Indians may have parked billions of dollars in secret accounts in Switzerland, but recovering the money isn’t going to be as easy as the BJP’s prime ministerial candidate L.K. Advani would have us believe.
To recover the money, the government must have a relevant treaty with Switzerland, said Mukesh Bhutani, a tax expert and partner with consulting firm BMR & Associates. And getting a pact may take years of diplomacy.
The government will also have to bring prima facie evidence against individuals who, it thinks, have money in Swiss banks. There would be a lot of specifics and nuances of international law that will have to be addressed, Bhutani said.
“A blanket approach conveying the sense that it is a witchhunt may not work,” said Dev Kar, lead economist at the Global Financial Integrity (GFI) project of Washington-based Center for International Policy.
“In Western countries, one’s privacy is a sacred cow,” said Kar, who is the author of what could be the only academic paper in recent times on illicit financial outflows from developing countries. He said, “The Indian government will have to do its homework. It's not going to be a cakewalk.”
But homework seems to be something Advani and his party seem to have done little of.
Advani’s first press statement on the issue on March 29 cited Wikipedia as the source for the estimate of money lying in Swiss accounts. He also cited some other estimates he called “credible”. According to those, Indian money in Swiss banks and other tax havens range between $500 billion (Rs 25 lakh crore) and $1.4 trillion (Rs 70 lakh crore).
But the truth is: there are no such “credible estimates”. A task force set up by Advani to draw a strategy to recover the money attributed the figures to newspaper reports, which, in turn, quoted no source. As it turns out, the top-end figure is traced to a chain of hoax mails that began sometime last year. They attributed the figure to the Swiss Banking Association, whereas no such organisation exists.
In a interview to Rediff.com, R. Vaidyanathan, a professor at the Indian Institute of Management and a member of Advani’s task force, backed the $1.4-trillion figure, saying it was a probable number based on the findings of Kar’s GFI study. The study estimated that the average annual outflow from India ranged between $22.7 billion and $27.3 billion during 2002-06 but isn’t sure if the numbers could be extrapolated for other years. Besides getting its facts wrong, experts said, the BJP task force offered very few concrete steps.
As a result, an issue of national interest is now being dubbed as a political gimmick.The Congress has tried to deflect the matter by questioning the credibility of Advani’s estimate.