Modi sets up team to get back funds sent abroad to avoid taxes

Modi sets up team to get back funds sent abroad to avoid taxes

NEW DELHI - A month into office, India's new government is targeting the huge cash hoards stashed away by its citizens in overseas banks.

Whether it will succeed is another matter.

In one of his first decisions as Prime Minister, Mr Narendra Modi set up an investigative team of retired judges and regulators to bring back billions of dollars of offshore funds sent illegally out of the country to avoid taxes.

The special investigation team (SIT) is headed by retired Supreme Court judge M.B. Shah and includes top officers of 10 investigative and enforcement agencies.

It has been given powers to probe all cases of "black money" generated through "unlawful activities" and to evade taxes.

It is estimated that there is between US$462 billion (S$577 billion) and US$1.4 trillion stashed away in these grey accounts.

Finance Minister Arun Jaitley yesterday said the government was writing to Switzerland, a major destination for such funds, to share details of Indian account holders in its many banks.

Switzerland said it has no list of suspected Indian tax evaders and does not plan to prepare one, reported Bloomberg.

Identifying black money and bringing it back will not be easy, said analysts, who asked if the Modi government will go beyond efforts by the previous government.

"It is a welcome step but it will not stop generation of black money. What is needed is a multipronged approach including tax reforms to cut and simplify taxes, involving more stakeholders including civil society organisations, common people and even international organisations that have been working on money laundering, and studying models of other tax-efficient nations. That is not happening," said executive director of Transparency International India Ashutosh Kumar Mishra.

Black money is money that is never reported to the authorities from the time it is generated. While the problem is not unique to India, the scale is staggering - some think the unaccounted money could equal or exceed the size of India's economy.

Professor Arun Kumar of Jawaharlal Nehru University, author of The Black Economy In India, said the loss to the Indian economy, including tax losses and loss of investment potential, was US$2 trillion over the last 60 years.

"The black economy works because of the collusion between corrupt politicians, corrupt businessmen and corrupt executive."

The previous Congress-led government took steps like signing tax information exchange treaties with dozens of countries, but very little information flowed.

Still, people have high expectations of the Modi government which won the recent polls on promises to clean up corruption and boost the flagging economy.

In the past, France and Germany had shared details of Indian account holders with overseas accounts and the government had launched cases against a handful and given amnesty to others.

Rich businessmen and politicians are sure to be worried. " Every time a step is taken, there is worry for a little while," said Prof Kumar, but those who stash money overseas also find ways to circumvent any new action.

The Congress, which faced criticism over its perceived lack of enthusiasm to track down offenders when in government, has questioned the Bharatiya Janata Party-led government's seriousness in pursuing the matter. "I find it absurd that they should have an SIT to bring back black money but they don't have an SIT to block the channels by which black money is going out," said Congress leader Mani Shankar Aiyar. "Is it perhaps because those who are sending black money are the ones who had funded Modi's extraordinary (election) campaign?"

The charge has been dismissed by the BJP as ridiculous. "It was the previous government which made serious efforts not to do anything. Where there is a will there is a way. And there is will (in this government)," said party spokesman Nalin Kohli.

This article was first published on June 24, 2014.
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