SACRED sleaze

Published: September 24, 2010 - 14:00 Updated: September 24, 2010 - 14:03

So why is it that the powerful Indian State never shows any courage to take on tax offenders and violators of law? Basically, the rich and powerful?
Sanjay Kapoor Delhi 

This needs reiteration. In 2008-09, when the credit crisis had choked and the crisis was spiralling out of control, proceeds from drugs was the only capital that was available for unlocking global banks. This sensational revelation came from no less a person than the head of United Nations Office of Drug and Crime (UNODC). He also claimed that majority of the $352 billion of global drug money was used for sustaining the world's financial system. 

During the economic meltdown of 2008, dirty money from criminal activities took a dip in all the toxic, sewage-filthy, holy rivers of India. For a while, there was no need for drug lords and mafias to figure out ways to launder their ill-gotten wealth. The cash-strapped banks were ready to wash funds from miscellaneous dubious origins. 

The first bailout to tottering international banks was provided not by governments - but by the criminal mafia. To many economy watchers, the continued occupation of the drug-based economy of Afghanistan (also, a mining treasure trove) by western forces, stems from the desire to control its whopping profits. As fantastic as this assertion may sound, there is plenty of anecdotal evidence to suggest that the Af-Pak drug mafia works closely with covert operatives of certain western powers. Even Afghanistan and Pakistan's economy is turbo-charged by drug money. 

It is not difficult to imagine what pay-offs druglords must have sought from grateful legal entities in the financial system. Besides getting their funds washed in recognised international banks, they must have also asked for relief from the criminal cases against them. Were those living off dirty money allowed to breathe easy?

As the nightmare of the slow-down stared at different governments, countries of old Europe backed by the US wanted action against tax havens where the world's dirty money was parked. The belief was that if the bulk of such funds could be brought back into the legal system then it could help revive the world economy. Switzerland, which manages 1/3 of the $7 trillion, was pressured by the US to give details about its nationals who had accounts in UBS. After dilly-dallying on the issue of bank secrecy and how exposure of privileged details about bank customers would violate the Swiss Constitution, the authorities were forced to cough up the list of American account holders. Similarly, German authorities, who been claiming greater damage to their financial system due to the presence of tax havens, bribed and arm-twisted a Liechtenstein banker to give details of 1,200 account holders. Some of the account holders happened to be Indians. 

Indian authorities did not show great enthusiasm to go after money stashed in places like Switzerland or Liechtenstein as they were convinced that India's much vaunted growth story could be impacted by this. Estimates suggest that about $1.7 trillion worth of Indian funds are sitting in tax havens. 

It is possible that this money has grown after the recent telecom scam and the gigantic multi-billion Commonwealth Games heist at display. "People with colossal amount of money made from the games contracts are looking for places to invest abroad," informed a fund manager. Surely, if this money is brought back, it can sort out many of our teething and perennial problems, especially linked to the abysmal condition of rural and urban poverty, mass education and public health. 

This kind of money is giving a heft to Indian business in ways that have never really been documented. Politician and economist, Subramanian Swamy, had been claiming that the funding of many sections of Indian businesses has been coming from dubious sources and is not determined by economic fundamentals. 

The lackadaisical attitude of the government to retrieve the funds squirreled abroad was best witnessed in the case of one Pune-based stud farm owner, Hassan Ali Khan. Income tax authorities, who raided his premises, found documents to suggest that he had deposits in UBS bank worth $8 billion. His Kolkata-based partner, Kashi Nath Tapuria, had something to do with this monster deposit. What kind of funds were these - commissions or kickbacks from arms deals or drug money? 

The enforcement agencies did not really enlighten anyone. However, a promise was made about pursuing this case vigorously. Investigations by Hardnews in Switzerland had taken the lid off the duplicity of Indian enforcement agencies when it discovered that contrary to their statements in courts and elsewhere, the plea for probe by Indian agencies had been rejected by the Swiss authorities as they had submitted "forged" documents. 

The Hardnews exposure last year had caused major embarrassment to the central government, but since then, nothing much has moved. On the contrary, income tax lawyers claim that there is a provision in the last budget that allows people, whose premises have been raided, to seek refuge in the Settlement Commission and sort out their problems. 

Even in the case of details that have been procured by Indian authorities in the Liechtenstein bank case, there is the usual recourse to obfuscate the names of beneficiaries in the name of bank secrecy. At the time of writing, agencies claim that they are seeking details of investments abroad and ascertaining how much tax these worthies would have to pay. 

Such a tepid response is a reflection of our times. Every tax offender, money launderer or individuals involved in massive financial crimes, including politicians, is allowed to get away easy so as not to convey a 'wrong message' to investors at a time when the 'globalised' economy is still unstable. The burden of crime and shame has been lifted from many of these transgressions and they are merely presented as simple income tax or foreign exchange violations that can be fixed by paying penalty. 

This environment of financial immorality has allowed many in the business space to engage in wanton loot of natural resources. Illegal mining in Bellary and other parts of the country, often at the behest of powerful, profit-driven, unethical corporate houses and suddenly rich companies like Vedanta, is just one such example of this loot. 

Look at the way the multi-crore Satyam scamster Ramalinga Raju had a good time at an expensive hospital while in jail and is now out on bail - precisely because the CBI played so transparently innocent. Or, how the spectrum scam was allowed to enter a diffused grey zone of no accountability with all those crores vanishing into the 2G blue, with powerful lobbies lurking in the backdrop. Indeed, open practitioners of brazenly illegal mining occupy cushy posts in the cabinet of a state government, they flex their muscle and money power, put up ads in national newspapers with their pictures, duly backed by the holier-than-thou leader of opposition in Lok Sabha. 
What signals does it send to honest, hardworking, tax-paying citizens? And to criminals, potential criminals, and organised gangs and miscellaneous mafiosi?

Much of the profit from illegal enterprises goes to tax havens and other destinations that provide comfort to such money. The arc of dirty money has become so big, omnipresent and vicious that it is subverting the authority of the State and the very essence and character of Indian constitutional democracy. It has also emboldened many businessmen to cock-a-snook at the government when it comes to paying off their dues.

Take the case of tycoon and MP, Vijay Mallya, the flashy owner of Kingfisher brand, an IPL team, airlines, yachts and castles across the world, who flaunts his wealth for all to see. He seems to be having a real good time not paying his dues - he owes hundreds of crores to public sector oil companies for use of aviation fuel by his airlines. He then has the audacity to pontificate that he does not need a pay hike as an MP as he has lots of money. 

So why is it that the powerful Indian State never shows any courage to take on tax offenders and violators of law? Especially, the rich and powerful? Including corporate sharks and corrupt politicians?

So why is it that the powerful Indian State never shows any courage to take on tax offenders and violators of law? Basically, the rich and powerful?
Sanjay Kapoor Delhi

Read more stories by SACRED sleaze

This story is from print issue of HardNews