Indian politicians pledge to recover tax haven ‘loot’
Monday, May 18, 2009
Illegal transfers of billions of dollars from India to Western tax havens have become a big issue after two weeks of campaigning in the country’s general election. As calls increase worldwide for a crackdown on the illicit movement of capital, L. K. Advani, the leader of the main opposition Bharatiya Janata Party (BJP), has vowed to repatriate as much as $1.5 trillion (£1 trillion), which he claims has been “looted” from India and moved overseas by corrupt officials, tax-shy members of the elite and leading companies over 60 years. Mr Advani alleges that the money – worth more than the value of India’s economic output last year – lies in secret accounts in Switzerland and other countries. In a populist attempt to win votes in a month-long election that is at its midway point, he has vowed, if elected, to spend it on development. Opponents say that Mr Advani wildly overstates the amount salted away, and other observers say that his claims are feasible, but impossible to verify. Either way, however, India is only one of many countries losing patience with clandestine offshore jurisdictions. In the firing line is the global “shadow economy”: the network of tax havens, disguised corporations, anonymous trust accounts and fake foundations that experts say allows “black money” – the proceeds of crime, government corruption and corporate tax evasion – to flow internationally. In the West, Angela Merkel, the German Chancellor, has led the battle against tax havens. Offshore account holders were put on notice last year when several countries, including Britain, began investigating accounts in Liechtenstein’s LGT bank after German intelligence services obtained a confidential client list. However, experts say that it is poor countries that lose most to the shadow economy, as capital outflows bleed development budgets, sap currency reserves and exaggerate income disparities, while corruption undermines commercial competition. Raymond Baker, the director of Global Financial Integrity (GFI), a Washington-based research group, says that about $1 trillion in black money is extracted from developing economies each year, mostly in the form of “commercial dirty money”. He said: “This usually involves some bookkeeping fakery, by which imports and exports are listed incorrectly to mask their true values. The actual profits are then relocated to a tax haven.” GFI estimates that between $22 billion and $27 billion was moved to tax havens from India every year from 2002 to 2006, 90 per cent of which will never return. An estimated 60 per cent was the result of corporate tax evasion. The rest came from government corruption and criminal activity. According to GFI, for every $1 that poor nations receive in foreign aid, $10 flows illicitly abroad. The research group has suggested that terrorist groups and drug cartels are among the biggest beneficiaries. Congress, the leading party in India’s coalition Government, admits that tax evasion is a problem, but claims that the BJP’s numbers are based on “bogus sources”. The Swiss Bankers Association has said that the issue of tax havens has become “good election fodder”. It dismissed the numbers cited by BJP as “incredible”, but declined to provide its own. Last week the Indian Supreme Court heard a petition demanding that the Government take steps to recoup money held in offshore accounts, the first petition its kind. The signatories, who included Ram Jethmalani, a former law minister, and K.P.S. Gill, a retired senior police official, alleged that no action had been taken so far because “influential politicians in most of the political parties are involved in the offences in question”. This month the G20 summit in London agreed to police tax havens using a framework developed by the Organisation for Economic Cooperation and Development. Experts say that the approach is flawed because it allows tax havens to judge for themselves when they should have to supply information on their clients.RELATED LINKS
0 comments:
Post a Comment