Nominal or Ineffective Measures of Indian Agencies to Bring Back Black Money

The recently released second set of Panama Papers has once again provided governing agencies around the world, with leads on information useful to probe the legitimacy of the anonymous dealings by individuals and entities with offshore tax havens. Details exposed in similar leaks earlier have often prompted unprecedented developments – from the resignation of Iceland Prime Minister Sigmundur David Gunnlaugsson in April 2016 following the public outrage as his name emerged in the first set of Panama Papers, to the shutting down of Mossack Fonseca, a Panamian law firm and corporate service provider, in March 2018. The revelations of the Panama Papers are based on the leaked internal documents of Mossack Fonseca firm – the first expose in 2016 encompasses the shadowy affairs of the firm from 1970s to 2015, while the latest release entails how the firm reacted to cover up its deceptive practices following the global expose from early 2016 through the end of 2017.

The latest leaks are said to comprise more than 1.2 million new documents, of which, at least 12,000 are linked to Indians. While this is not the first time that giant industrialists, politicians and celebrities from India are exposed of their secretive financial dealings with offshore tax havens, yet, successive Indian governments have only displayed lackluster attitude with such tax frauds by constituting nominal probes, which are being prolonged for years in spite of having a dearth of laws to tackle them.

Starting with the Liechtenstein scandal which broke out in 2008, the Swiss leaks (2011), Panama Papers (2016), Bahamas Leaks (2016), Paradise Papers (2017) and now the Panama Papers: Aftermath, every release has exposed details of hundreds of rich Indians stashing money in the billions in various offshore entities located in British Virgin Islands, Panama, Bahamas, Cyprus, Switzerland among others. However, while India’s government agencies — which have publicly taken cognizance of such affairs immediately after each expose—constituted special investigative committees to probe into the revelations, so far, no substantial outcomes have emerged. While in one Liechtenstein case, the investigation was completed, and all other cases are still under investigation.

Read More: How the Global Rich Exploited Secretive Offshore Tax Havens?

Responding to the latest Panama Papers leak, government officials have again stated that a multi-agency group (MAG) headed by the Central Board of Direct Taxes’ (CBDT) chairman, including representatives from enforcement directorate (ED), Reserve Bank of India (RBI) and Financial Investigation Unit (FIU). This has been the case whenever such large-scale media releases have emerged.

The list of names that have emerged in both sets of Panama Papers revelations include Shiv Khemka, Amitabh Bachchan, Jehangir Sorabjee, DLF Group-promoter K.P. Singh and his family, Anurag Kejriwal, Navin Mehra of Mehrasons Jewellers, and Hajra Iqbal Memon, Ajay Bijli (and his family), owner of PVR cinemas, Kavin Bharti Mittal, CEO of Hike Messenger and son of Airtel's Sunil Mittal, Jalaj Ashwin Dani, and son of Asian Paints promoter Ashwin Dani among others.

The CBDT had recently notified in June 2018 that 426 people whose names are in the Panama Papers (2016) are under investigation by a specially constituted MAG. The agency classified 352 cases as non-actionable and 74 cases as actionable. It further stated that the probe detected undisclosed foreign investments of about Rs.1,140 crores and in 16 cases, criminal prosecution complaints have been filed in jurisdictional courts, which are at various stages of hearing.

Swiss Leaks

In 2011, the France government passed on information of 628 Indians holding bank accounts in the HSBC bank, Switzerland, to Indian authorities. Later in 2015, International Consortium of Investigative Journalists (ICIJ), in collaboration with several other media groups, had released account details of the same bank dubbed as Swiss leaks, in which 1195 Indian names were associated with the same bank. As of 31 August 2016, Ministry of Finance stated that through investigations in these cases, an undisclosed income of about Rs.8200 crores (including protective assessments in some cases) was brought to tax in 404 cases. A concealment penalty of Rs.1285 crores was levied in 160 cases, and 164 criminal prosecution complaints were filed in 75 cases. The amount recovered in these investigations is barely anything when compared to the reported amount stashed in the bank in question (which was in the range of Rs.25,420 crores till 2007).

Some of the high profile names included in Bahama leaks are Anil Agarwal of the Vedanta Group, Kabir Mulchandani of the erstwhile Baron Group, Fashion TV India promoter Rajan Madhu, and Aman Gupta, chairman and chief executive of Finnish water brand Veen Waters, among others.

Bahamas has been a favorite tax haven for Indian elites for some now. For instance, reportedly in the beginning of this decade, exports to Bahamas from India have surged from $2.2 million in 2008-09 to $2.2 billion in 2010-11.

Some of the prominent names to have come up in the Paradise Papers include Vijay Mallya, Harsha Moily, BJP Member of Parliament Ravindra Kishore Sinha, the then-Minister of state Civil Aviation Jayant Sinha, and Congress leader Sachin Pilot among others.

Read More: The Tilted Global Scales: Tax Havens and Financial Secrecy

Liechtenstein scandal

UPA government had constituted a special investigative team in 2009, when it received details of Indian names and trusts with accounts in Liechtenstein's LGT Bank from German officials. It took nearly 10 years for the Indian investigative agencies to complete the probe despite a small number of 18 people being involved in the case. In March 2017, Finance Minister Arun Jailtley stated in Parliament that the investigation in this case was over and an undeclared income of around Rs.6,500 crores was found.

Before the 2014 general elections, one of the major promises of the ruling party BJP was to bring back black money from abroad. However, in spite of having access to crucial information about an undisclosed amount of money running into billions, hidden in foreign countries, being revealed in the past four years, barely any action has been taken by the present regime under the NDA to recover the money or prosecute the identified offenders.

Read More: India Tripping on Black Money in Tax Havens