The Special Investigative team (SIT) to probe black money will hold its first meeting on Monday with government handing out a sweeping mandate to the panel to crack down on India’s infamous and bustling parallel economy.
Viewed as going hand in hand with corruption, “black money” has been at the top of the agenda of widespread public protests over the last couple of years. To meet a deadline set by the Supreme Court for the previous government, on its first day in office last week Prime Minister Narendra Modi’s cabinet lost no time in setting up a high-powered SIT headed by retired Supreme Court (SC) judge MB Shah to look into the issue of black money and slush funds.
The SC had directed the government to constitute a SIT to investigate individuals whose names were disclosed by Germany for having accounts in LGT Bank in Liechtenstein – a European principality known for its banking secrecy laws.
The government has given the SIT a wider mandate to investigate the operations of Indian individuals and “entities” whose money is found stashed in foreign banks. It will file periodic status reports to the Supreme Court.
“On black money, till now there were only names and complaints. Now we will launch probes and also devise best measures to get the money back home,” an official said, requesting anonymity.
The income tax department has given to the Enforcement Directorate (ED)—the agency that tracks overseas money laundering deals—names of 17 individuals who had held accounts in Liechtenstein’s LGT Bank.
“The ED has sought more information, but the tax department has said that there were specific clauses in the tax treaties with these countries that prevent sharing of information,” another official, who did not wish to be identified, said.
The official said that in the last two years, the income tax department has collected 7704 “items of information containing details of payments received by Indian citizens in various countries, besides information from LGT Bank accounts.”
In addition, in the past one year the government has made more than 175 requests to countries with which India has inked tax treaties.
“This information is in various stages of processing and investigation,” the official said.
There are no official estimates of India's black economy. Global Financial Integrity (GFI), a Washington based think-tank, has estimated that Indians had salted away $462 billion ( about Rs 28 lakh crore in current exchange rates) in overseas tax havens between 1948-2008.
The government is expected to reveal a new estimate, the first since 1985, of India’s unaccounted “black money”, most of it stashed abroad, and follow it up with a plan to hold it to account.
It has commissioned the National Council for Applied Economic Research (NCAER), National Institute of Public Finance and Policy (NIPFP), and National Institute of Financial Management (NIFM) to bring out an estimate of India’s black economy.
“Given the complexities inherent in quantification of unaccounted income and wealth both inside and outside the country, it will take some more time for the finalisation of these reports,” an official said.
The BJP, in a 2011 report, had estimated India’s black economy to be worth around $500 billion and $1.4 trillion or about between Rs 30 lakh crore and Rs 84 lakh crore.
Between 2009-10 and 2012-13, the income tax department has detected undisclosed income of more than Rs 65,000 crore through specific “search and seizure” operations and “surveys’.