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Mainstream, Vol. XLIX, No 13, March 19, 2011

Bribe Money, Crime Money—Safe Money

Saturday 19 March 2011, by T J S George

India will not chase those illegal funds in foreign banks, that’s for sure. The real reason is that virtually every VIP politician and bureaucrat is involved in it. It is mass guilt, not international treaties as the Prime Minister says, that makes India helpless.

The US has proved that a determined government can get things done. And let’s not forget that America’s stakes are much less than India’s. A Swiss Banking Association report revealed in 2009 that Indians had $ 1456 billion stashed away in secret accounts, more than all the others in the top five put together. Russia, the second ranker, had $ 470 billion, UK $ 390 billion, Ukraine $ 100 billion and China $ 96 billion; the USA was not even in the top five list.

Yet America was the one that decided to challenge the system, systematically, doggedly. Here is what it did. The Internal Revenue Service, America’s tax collecting agency, launched an extensive investigation into tax evasion by its citizens. The evidence collected included dozens of memos and e-mails sent out on behalf of the prominent Swiss bank UBS suggesting that American millionaires could take advantage of, as the New York Times put it, “ a UBS plan to help rich customers evade taxes by hiding money in offshore havens like the Bahamas”.

The Justice Department then filed a case in the US seeking to compel UBS to divulge the identities of 52,000 Americans suspected of using secret accounts at the bank. A day earlier, realising the noose tightening around its neck, UBS had agreed to pay $ 780 million to settle claims that it defrauded America’s Internal Revenue Service. The Justice Department case revealed damning details of UBS’ secretive operations—from using code words to providing wealthy clients with special electronic devices to access their accounts in secrecy. It was the filing of a watertight case in US courts that compelled UBS to pay reparations to avoid criminial prosecution.

We do the exact opposite. Even when a watertight case exists, we dilute it and obfuscate it and mess it up until it becomes untenable in any court of law. This is what the best brains in our government did to let Ottavio Quattrocchi go free when he has caught in Malaysia and then again in Argentina. We also use the sanctimoniously phrased “voluntary disclosure of income” concept to let the thieves legalise their stolen wealth. Those who stashed away billions were allowed to pay taxes at the ridiculous rate of three-to-four per cent of their “declared” money and keep the billions with a clean conscience.

TAKE the case of Pune’s Hassan Ali Khan, much in the news these days. Income tax raids in January 2007 had revealed that this gentleman had $ 8 billion (that’s right billion) deposited in UBS, Zurich and that he had not filed IT returns since 1999. A show-cause notice demanded from him Rs 40,000 crores on taxes alone.

In August 2009 the government disclosed in the Rajya Sabha a list of tax defaulters. Hassan Ali topped the list with outstanding arrears of more than Rs 50,000 crores. Chennai-based chartered accountant M.R. Venkatesh calculated that if Khan’s dues were taken along with his Kolkata associates, the “amount could be a staggering Rs 100,000 crores”. In an interview in The Week, Finance Minister Pranab Mukherjee said the government seemed to have recovered the tax dues from Khan. “However,” said Venkatesh, “the revised estimates for 2009-10 do not reflect this. Rs 100,000 crores is too large a sum to be lost even in the Government of India’s budget.” Besides, a Budget proposal for 2010-11 sought to make Khan’s case admissible by the Settlement Commission. Plugging the loopholes, so to speak.

Why this interest in the country’s most sensational defaulter? As Venkatesh notes: “A stud farm owner could not have been the originator of such a large income, indicating that it was not his money that was laundered.”

See why we will not go the American way? Our hoard comprises bribe money, crime money, mafia money—all sacrosanct, all safe

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