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Ram Jethmalani is a senior politician and eminent lawyer.

Black money amnesty scheme is a scam to cover up another scam

o we are at it again, desperately trying to change the colour of money from black to white, with the same Fair and Lovely amnesty recipe. I learn from press reports that the Central Board of Direct Taxes (CBDT) is "seriously considering" recommending to the government a scheme on the lines of the Voluntary Disclosure of Income Scheme (VDIS) announced in 1996 to bring back black money stashed in tax havens abroad for productive use in India. It is reported that the source of the money will not have to be disclosed, but criminal action will be taken if the money (or the assets) pertain to proceeds of crime. How the two halves of the sentence can be harmonised defies my logic.

In a democracy, every citizen is entitled to know the character and integrity of every other citizen, lest one day a crook manipulates a constituency of voters, colleagues in his party and occupies the office of Prime Minister. Concealing vast amounts of money and depriving the poverty stricken nation of the revenue it badly needs is a criminal offence by itself. How will we find out whether or not one such criminal is already in office, instead of being in Tihar Jail? So all talk about criminal action to be taken is nothing but deception. The people and their representatives, the Anna Hazares and Ramdevs, the petitioners in the Supreme Court whose action has made the government challenge even the appointment of an honest and credible investigation agency, should decide this in glaring light. Any criminal investigation, prosecution and eventual trial are all open public proceedings, void if conducted in secrecy. Secrecy will help criminals' accomplices to accept a small fraction of the stolen money and treat it as a matter where all heinous crimes can be washed away without anyone knowing how the figure was accepted. I do not trust this government. It has yet to explain to the people how a claim of $3.3 billion due to the Bhopal victims was settled for one-seventh the amount, that is less than a piffling half-billion. No sensible Indian will be fooled again.

The motive behind this proposed amnesty scheme is supposedly patriotic — to encourage foreign remittances that are necessary for accelerating infrastructure growth in India. I learn that the captains of business houses have been proactive and influential in steering this proposal, so that idle funds lying abroad can be used for national development. Touching, indeed, is this belated concern about the idleness of unaccounted funds in distant shores, and their eagerness to restore it to the country after paying a "levy". This matches the eagerness displayed when the money was stashed abroad illegally.

The proposed amnesty scheme is essentially unconstitutional, arbitrary and unfair, because it goes against the government undertaking given to the Supreme Court in the case of All India Income-tax Practitioner's Appeal (1998) that it would not float another amnesty scheme. It is arbitrary and unfair, as it chooses only grave money laundering offences for amnesty. On the same lines, can corrupt police or revenue officials or petty economic offenders return the bribe money with penal interest and demand the same amnesty as their more corrupt comrades can do, operating hundreds of crores as against their thousands and lakhs?

The result of the previous amnesty scheme, the VDIS of 1996, which resulted in a peanuts repatriation of Rs 10,000 cr, proved that amnesty schemes do not have any impact on curbing the parallel black money economy in our country. The morality of schemes that offer relief to tax evaders and penalise honest taxpayers by default, is questionable. It amounts to the nation compounding the crime of plundering the national economy, and tainting the credibility of our taxation systems in the eyes of our law abiding taxpaying citizens.

Further, amnesty schemes promise complete confidentiality regarding the amounts secreted abroad, the amounts returned, and the differentials normally shared by all stakeholders. Can one trust a government that avoids sharing such information with the public? If at all an amnesty scheme is announced, its first feature should be complete transparency. Let an independent commission headed by an eminent sitting or retired judge be appointed to clear every case of settlement, with details available in the public domain, so that people can offer information regarding the credibility of the settlement offered.

hile the front door amnesty scheme is in the process of finalisation, a backdoor amnesty scheme is already in operation through a crafty, subterranean sleight of hand. It flows out of Para 146 of the Finance Minister's last Budget speech: "It has been represented that the taxation of foreign dividends in the hands of resident taxpayers at full rate is a disincentive for their repatriation to India and they continue to remain invested abroad. For the year 2011-12, I propose a lower rate of 15% tax on dividends received by an Indian company from its foreign subsidiary. I do hope these funds will now flow to India."

The government had to resort to camouflage in the background of the undertaking given to the Supreme Court that it would not float another such scheme in future. Hence, the sleight of hand through amendment to the Income-Tax Act by a newly inserted Section 158BBD, with effect from 1 April 2012, to legalise remittances to Indian companies from abroad at a concessional rate of 15%. Its implications are clear: any Indian company with illegal money abroad could set up a subsidiary in one of the innumerable tax havens, transfer its illegal funds to it, and re-transfer the money by way of dividends of fictitious activities to the Indian holding company.

The return of black money to India is, per se, a complex and laborious issue, encompassing concerted financial, legal and international processes and meticulous monitoring. The UPA government has done everything possible to complicate the maze further, so that no one except its authors can ever comprehend it. The fact that they themselves may get suffocated in the chakravyuha (as is happening today) is not their immediate priority. That is for the future. It is the present that must be defused and saved.

The UPA government has adopted the line of least resistance towards black money, and a determined political will towards concealing facts. Simply put, the government strategy is to wear out its opponents. The government is aware that its opponents cannot match its muscle and capacity to derail investigations and legal processes.

Presently, there are two options before the government to get our money back. The first is to behave like a responsible, honourable and strong nation and demonstrate political will to fight corruption. Use the ample machinery available through international and bilateral legal instruments, the Tax Information Exchange Treaties (TIEAs), Double Taxation Avoidance Agreements (DTAAs) and the Organisation for Economic Co-operation and Development (OECD) automatic exchange route. The Swiss have volunteered cooperation; follow the example of the US and UK, and get India's money back to the country. Or, behave like a banana republic and a failed state, plunder capital from your own country through a UPA-sponsored version of imperialism, perpetuate poverty and backwardness by denying the people of this country their rightful development dividend, and repeatedly reward and incentivize the looters with amnesty schemes, and face the verdict of history.

Mr Prime Minister, would you like history to remember you as having presided over the greatest frauds practised on this gullible nation?

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