(Weekly Organ of the Communist Party of India (Marxist)
April 26, 2009
BJP’s Swiss Accounts Report: A Self Goal
CPI(M) Polit Bureau member Sitaram Yechury released the following statement of the Polit Bureau of the Communist Party of India (Marxist) at a press conference held on April 18, 2009
L K Advani released a report of a task force constituted to recommend measures to bring Indian funds illegally stashed away in Swiss banks and other tax havens, yesterday in Mumbai. This BJP’s task force report quotes (page 8) from a study by Washington based Global Financial Integrity: “The GFI study shows that during the period from 2002 to 2006, annually $27.3 billion were stashed away from India”. If this is true, then nearly $55 billion worth of illicit transfers occurred in the two year period, 2002 to 2004, under the BJP-led NDA government itself, in which Mr Advani was the deputy prime minister and the home minister. What did he do to prevent such illegal transfers when he was in power?
The BJP’s task force has arrived at a total figure of Rs 25 lakh crore of Indian wealth being held in tax havens on the basis of the following argument: “So the amount of Indian black wealth secreted away in the last 60 years – estimated at from $500 billion [Rs 25 lakh crores] to $1400 billions [Rs 70 lakh crores] – does not seem to be wide off the mark, if the GFI estimate for the 5-year period 2002-06 is considered.” Going by the BJP’s estimate, around $ 164 billion or over 30 per cent of the total stock of illicit money would have been accumulated during the six years of NDA rule!
The task force report is nothing but a hoax to cover up for the misdeeds of the erstwhile BJP-led government. The BJP-led government did nothing to review the tax avoidance treaty (Double Taxation Avoidance Agreement) with Mauritius during its tenure despite repeated demands by the CPI(M). The Mauritius route remains to be the largest conduit for the evasion of capital gains tax and corporate taxes, as far as India is concerned. Mauritius accounts for 44 per cent of cumulative FDI inflows into India from April 2000 to November 2008. In contrast, the US and the UK accounts for only 8 per cent and 7 per cent of India’s FDI inflows. It is clear that foreign companies are using the Mauritius route to evade Indian taxes. The BJP’s task force is completely silent on this aspect.
The BJP task force report (page 16) mentions about Participatory Notes and claims: “Actually the Indian rules permit a Switzerland in India. How can India call for action against Switzerland when it permits a mini-Switzerland in India?” However, FII investment through the non-transparent Participatory Notes was permitted without any restriction during the NDA rule too, so much so that by the end of its tenure in 2004, investments under the PN route accounted for nearly 50 per cent of total FII inflows. What credibility does the BJP has to criticise these policies today?
The CPI(M) and the Left parties have been consistent in demanding a thorough review of the tax avoidance agreements with Mauritius and other countries, banning of Participatory Notes and restoration of the long-term capital gains tax which was abolished by the BJP-led NDA government in 2004 in order to encourage the speculators. It is another matter that the Congress-led UPA government, given its proclivity to appease speculative financial interests, did precious little to salvage the situation.
The global financial meltdown and economic crisis has brought the issue of tax evasion by corporates, financial entities and the super-rich into sharp focus. Governments across the world are taking steps to crack down on tax havens like British Virgin Islands, Cayman Islands etc. The Swiss banks are being asked to disclose information on their account holders in order to track down assets built through tax evasion. The Indian government, however, has so far remained impervious to this growing global concern. In a press release dated February 23, 2009 (much before this issue appeared on BJP’s radar) the CPI(M) had demanded: “It is imperative that the UPA government demand from Swiss banks and from banks in tax havens details of accounts of Indians. In the case of India, it is not only a case of tax evasion but also of funds being illegally stashed abroad, or, used for money laundering. If the government is serious about stopping black money and raising resources to meet the growing economic crisis, it must take steps to bring back the unaccounted, or, ill-gotten wealth of Indians abroad”.
CPI(M) reiterates the following policy steps prescribed in its Election Manifesto (page 15):
Effective taxation of speculative capital gains by restoring Long-Term Capital Gains Tax and increasing Securities Transaction Tax
Launching a drive to unearth black money, especially those stashed in Swiss Banks and other offshore tax havens
Plugging the Mauritius route; Reviewing Double Taxation Avoidance Agreement with Mauritius and other countries
Prohibiting Participatory Notes used by the Foreign Institutional Investors (FIIs) and discouraging speculative finance
Reversing moves towards Full Capital Account Convertibility