Repatriation of black money stashed away in illegal foreign bank accounts was a key theme of the BJP’s victorious 2014 election campaign. In speech after speech leader after BJP leader promised to repatriate black money held in foreign banks in 100 days after coming to power. Baba Ramdev and many other BJP cheerleaders even put out fantastic figures of how much each Indian would gain once the black money has been brought home. The BJP’s written manifesto of course avoided mentioning any specific time frame or suggesting any amount, but the first step Modi took after being sworn in was to set up a Special Investigative Team to track black money to showcase his government’s commitment on the issue.
How far the SIT has progressed on the subject is not known. What is known is that the BJP in power has now started singing an altogether different tune on the issue of repatriation of black money. It now says the government is handicapped by treaties with various countries in the matter of disclosure of names. After telling the whole world that the Congress will have to suffer embarrassment after names are disclosed, the government has now finally submitted three names to the Supreme Court – former Dabur group director Pradip Burman, Rajkot-based bullion trader Pankaj Chimanlal Lodhya and Timblo Pvt Ltd, a mining company from Goa owned by Radha S Timblo. Interestingly, records have it that in recent years the Timblos made hefty donations to the BJP as well as the Congress – Rs 1.18 crore to the BJP and Rs 0.65 crore to the Congress. Whether this causes any embarrassment to the BJP or not, the nexus between black money and the BJP, or the Congress for that matter, stands squarely exposed.
It is quite clear that the BJP would like to use the issue of black money as a weapon of wheeling and dealing with selective disclosures and measured noise at opportune moments. The people’s movement against corruption must therefore free this issue from the BJP’s partisan calculations and hold the government accountable on this crucial question. While the BJP would like to keep everybody focused on a few accounts on a few foreign banks, the real issue is evidently much larger. It has rightly been pointed out by knowledgeable experts that the money held illegally in foreign banks forms only a minor part of the problem. Much bigger amounts are actually ‘round-tripped’ to India in the form of FDI. And even bigger mind-boggling sums of black money never go offshore and thrive in India in myriad forms of undeclared transaction and wealth. The issue, as Prof Arun Kumar of JNU has repeatedly pointed out, is not just black money but the much larger black economy and the culprit is the nexus of political power and big business that protects it.
Successive governments in India have appointed committees and commissions to study the problem of black money. Yet the problem has only gone on to acquire increasingly menacing proportions. Evidently, the measures adopted to tackle the problem have proved to be thoroughly ineffective and even counter-productive. There have broadly been three responses – (i) amnesty schemes to promote voluntary disclosure, (ii) incentives to legitimise investments made from tax havens across the world and (iii) progressive reduction in tax rates in the name of improving compliance and lowering tax evasion. All these measures have failed to make any dent into the problem of black money, if anything they have only proved to be mega facilitators for the rapidly growing black economy. Modi talks of getting FDI from US and Japan to turn India into a manufacturing hub, but the fact is since 2000, it is Mauritius which has been the largest source of FDI into India (accounting for some 40% of FDI while the US accounts for only 6%) and bulk of this FDI is going into the most lucrative real estate sector!
For an effective war on black money India must not only scrap the tax avoidance treaties signed with tax havens like Mauritius and Switzerland and plug the hawala routes through which money is routinely sent abroad but also strictly enforce domestic tax enforcement and mete out harsh penalties to corporate tax defaulters. And as long as major ruling parties will be funded by black money holders as has been exposed in the case of the Timblo donations to BJP and Congress there can be no political will to combat and confiscate black money. The battle against black money must therefore perforce also be directed towards electoral reforms to end corporate funding of political parties and dismantle the unholy nexus between tax evaders, law makers and law enforcers.