Brij Bhardwaj
As the clamour for bringing black money stacked abroad in tax heavens like Switzerland and other countries in Europe grows the country is looking to the Government of India for action. It is generally believed that the sums involved are huge and can go a long way in solving the problems of the country. The international opinion has also turned against countries which allowed their banks to accept deposits without verifying the antecedents and covered their tracks under the cover of secrecy of banking law. Pressure has grown in the wake of terrorist activities including the attack on U.S to check flow of funds for criminal activities.
The result has been that many countries in Europe including Switzerland have started sharing information about funds kept by foreign nationals in their respective countries to enable the host countries to investigate if the funds in question were part of ill-gotten gains kept abroad to avoid detection. The Government has been working to investigate the details of the accounts received by them from different Governments and agencies. In many cases the owners of such accounts have accepted the liability of withholding taxes and paid up while some more cases are under investigation.
It is no secret that businessmen, politicians, film stars and others are guilty of this practice and it is also known that flow of funds in reverse direction takes place during the elections. Much of it is part of money laundered which is estimated to be around two trillion dollars every year. According to United Nations office, Drugs and Crime, generate about three per cent of World GDP. The general myth that money launderer is an individual who has received huge sums of money as bribe and is keeping it abroad to conceal the same is not true.
The fact actually is that black money is generated by lakhs of individuals by evading payment of taxes. This includes not only tax on income but other taxes also like the excise and custom duties. Counterfeiting, smuggling is a major contributor in generating black money. All individuals who evade taxes are guilty of generating black money. So far there has been stress on finding out black money kept abroad or invested in land estates or in gold instead of looking at modus operandi of avoiding payment of taxes.
This according to experts amounts to shooting the messenger as what needs to be checked is the creation of a system which leads to generation of black money. It is not an isolated effort or one time action but a continuous process which needs to be reversed. One can appreciate actions like getting information from foreign Governments about the money kept there and also collecting more intelligence by setting up more offices abroad. One can also follow up on suggestions made by different panels to check this through making laws more stringent, fast trial courts, and establishment of institutions like Lok Pal at Center and Lok Yukta in States.
But basic problem which is crying for attention is widespread counterfeiting and smuggling which is leading to generation of black money on a huge scale not only in India, but world over. For instance counterfeiting is considered as world’s fastest growing industry and current estimates show 10 per cent of world trade falls in this category. A recent study conducted by Business Action to stop counterfeiting and pirated goods currently estimated it at 600 to 650 billion U.S dollars which is likely to double by 2015.
The challenge posed by Counterfeiting and Smuggling has become the biggest challenge for Indian industry and the Government because of loss of revenue and brand erosion. Action, however, is slow and sluggish because of low priority given to economic offences by the enforcement agencies including police whose pre-occupation with more serious crimes and law and order leaves little time to them to deal with white collar crimes. In some cases for shortage of manpower or lack of knowledge and skills to tackle such crimes they remain undetected.
According to a FICCI study spurious goods are available in pharmaceutical drugs, computer and software goods, soft drinks, cosmetics, toiletries and is also rampant in automobile goods. It is estimated that twenty per cent of total road accidents can be attributed directly or indirectly to counterfeit automobile parts whose values is estimated to be around Rs 2,500 crores. Estimates of fake or counterfeit medicines vary from 5 to twenty per cent. If counterfeiting and smuggling are checked thousands of additional jobs can be created.
Cigarettes smuggling has become a major security concern for many countries as many outfits like Al-Qaida and Taliban are turning to illicit trade to finance their activities. According to U.S Department of Justice Bureau Alcohol, firearms and Tobacco are some of the items which are used to finance the activities of terrorists. These items being highly taxed offer big opportunity to smugglers and counterfeiters to make quick money as they are no longer interested in smuggling of gold or other luxury items.
A time has come when the political parties should divert their attention from only looking at avenues where black money is invested or kept and start plugging loopholes which help in its generation.
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