India’s ‘black money’ list withheld from public

More than 600 names were submitted to the supreme court by the government and have been passed on to other investigating agencies but the list will not be made public.

India’s attorney general Mukul Rohatgi, centre, addresses the media outside the supreme court in New Delhi on October 29, 2014 after the government handed over a list of more than 627 people with unauthorised foreign bank accounts as it cracks down on rampant tax evasion. Altaf Qadri/AP Photo
Powered by automated translation

NEW DELHI // India’s supreme court on Wednesday decided not to make public any names on a list of 627 Indians holding untaxed, or black money, in overseas bank accounts.

But the respite is fleeting. The court has also directed a special investigation team looking into these illegal black money accounts to submit a status report by the end of November.

In a process that has been ongoing since 2011, when the supreme court began asking for disclosures of information from the government's investigations into black money, the next hearing has been scheduled for December 3.

The names, which were submitted to the court by the government in a sealed envelope on Wednesday, have also been passed on to other investigating agencies and the income tax department.

The court’s directive has lent impetus to an issue that has roiled Indian politics since the tenure of the previous Congress-led government. Plagued as it was by corruption cases during its tenure in power, the party laid itself open to the accusation that it was not acting decisively enough in investigating illegal overseas accounts.

Public anger over corruption fuelled political and media debate over black money. Corrupt politicians and tax-evading businessmen had salted away billions, perhaps even trillions, of dollars abroad, according to popular perception.

Earlier this year, during his election campaign to be prime minister, Narendra Modi had railed against the Congress on this issue, promising to “bring back” black money and pour it into welfare schemes.

“Should this money, stolen from us, return to us or not?” Mr Modi said in a speech in January. “If we could bring back the money stashed by these thieves and looters in foreign banks, we could even give out 150,000 or 200,000 to every poor person in this country.”

“The day the Bharatiya Janata Party wins power, every rupee will be brought back to India and used to benefit the poor,” he added.

Since black money is held in secret tax-haven accounts overseas, there is no reliable figure for how much money Indians have in such accounts.

Estimates vary wildly. R Vaidyanathan, a professor of finance at the Indian Institute of Management in Bengaluru, has come up with the highest estimate: $1.4 trillion (Dh5.14 trillion), based on published literature about illicit outflows of money.

But an estimate by Global Financial Integrity, a Washington, DC-based research institute, says that roughly $213 billion of untaxed funds — $462bn in today’s money, according to the institute’s conversion — left India between 1948 and 2008. In 2011, a report by the Swiss National Bank, in a first-ever disclosure of this kind, said that Indian citizens held only $2.1bn in savings and deposits in Switzerland.

The list handed over to the Supreme Court is, in itself, not new, as the chair of the special investigation team, M B Shah, told the CNN-IBN television channel on Wednesday. Containing the names of 627 Indians who had accounts with an HSBC subsidiary in Geneva in 2006, the list was handed to the Indian government by the French government in 2011.

The French government, in turn, had come into possession of it after the information had been stolen from HSBC by a former employee.

Mr Shah’s team was formed in 2011, as well, at the insistence of the supreme court. That year, the court asked that the government fully disclose its information on Indians holding black money overseas.

But the congress-led government argued that such disclosures could place it in violation of international tax treaties and confidentiality norms, and that its own agencies, rather than the court-nominated team, ought to conduct these investigations.

Only this June, after Mr Modi came to power, did the new government divulge part of the list to the special investigation team.

Mr Modi’s government has also maintained that it should only make public the names of account holders whom it can prosecute, and that it is bound by international conventions to safeguard some confidentiality norms.

On Tuesday, the court, impatient with the government’s stance, demanded that the full list of 627 names be handed to it, to be passed on to its investigation team.

“Why are you trying to protect people having illegal bank accounts in foreign countries?” a three-judge bench demanded of the attorney general, Mukul Rohatgi. “Why are you providing a protective umbrella for all these people?”

On Monday, however, the government did reveal the names of eight people on the list against whom prosecution proceedings have been initiated. The most well-known among them was the industrialist Pradip Burman, of the Dabur India group. The others included a bullion trader in the Gujarati town of Rajkot and the members of a family-owned Goa-based mining concern.

Mr Rohatgi told the supreme court on Wednesday that an undisclosed number among the list of 627 had agreed to pay back taxes and penalties for hiding their income.

Any punitive or legal action that Mr Modi’s government is able to initiate against tax absconders will benefit the prime minister’s image. He has promised repeatedly to be tough on corruption, and walking this talk is expected to burnish his image.

But it remains unclear how, and how much, black money can be repatriated to India, as Mr Modi promised to do.

The focus on untaxed money stashed abroad also distracts from the volumes of black money held within India.

A lot of untaxed cash is pumped into real estate in and around India’s biggest cities, for example. Although there are no reliable estimates for these amounts either, they may well rival some of the approximations of black money overseas, according to analysts.

“If you have 10 businessmen who occasionally want to get rid of black money, you can build an apartment building,” said Gautam Bhan, a senior consultant at the Indian Institute for Human Settlements in Bengaluru.

“You buy and resell and buy and resell until you can launder the money, turn black into white.”