The Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015

By Dr. ShashiTharoor


Thank you, Madam Speaker. None of us disagrees, obviously, that black money is a serious problem. My Party has made it very clear that we would support any serious effort by the Government to bring back black money to this country. But this Bill has four fatal flaws. I would like to briefly touch upon each of these, because the Government should be conscious that we are not supporting them blindly. We understand that there are some real limitations we would have liked to have seen improved.

The first is that this Bill rests on the premise that foreign assets and foreign accounts are the principal problem in black money. They are not. We actually have no real idea of the scale of the problem. The Ministry of Finance says that there is no official estimate. They are right. We have all heard a number of figures advanced during this debate. The most objective source, the US-based Global Financial Integrity, came up with a report saying that in the entire period from 1948 to 2008, there was 213 billion dollars lost, which in todays terms, is about Rs.20 lakh crore. The hon. Member from Andhra Pradesh mentioned a more recent report of Rs.28 lakh crore. But you are still ending up not with Rs.15 lakh per Indian but under Rs.25,000 per Indian in black money outside.  So, first of all the scale of the problem is much smaller than the people assume.

More important, the domestic black money is a much bigger figure and is a much larger problem. Yet domestic tax evasion remains a civilian offence whereas this Bill criminalizes foreign assets. Let us face it. This Bill is a pure political diversion by the BJP to distract the people from the Government’s failure to actually tackle black money generation in this country, within India.

In fact, even black money generated abroad, as has been pointed out by many speakers, is brought back to India as FDI and the so called round-tripping, especially through investment havens like Mauritius. During the last financial year, 4.9 billion dollars came in that way from Mauritius. So, if this Bill is indeed as ambitious as the Minister says, the ambition seems to consist of scratching the tip of the iceberg while the real bulk of the iceberg remains hidden in this country.

The second fatal flaw is that there is no mechanism to actually retrieve information on the defaulters. We are talking about the fact that we need to get agreements with foreign Governments to do this. Are there any new Governments prepared to work with us for it? There are Governments which we have concluded agreements with.  Are there any new Governments that have come on board to give us information? How many Governments are willing to cooperate? We know that foreign countries are just not waiting to hand over information to us about Indians holding black money in their countries. The fact is that their domestic laws will come in and International Treaties will come in.

Madam Speaker, for an example, if you want information on Swiss Bank deposits, the Swiss Government will not reveal them and cannot reveal them under their own laws, until we provide the names of individuals we are investigating, the names of the banks where they have their money and evidence of criminality in the acquisition of this money. The Swiss Government has said that they will not support any “fishing expedition” by the Indian Government looking for Indian names in their banks. You have announced these harsh punitive measures in today’s Bill but how will punitive measures alone promote compliance when you do not have any way of knowing, of getting information that will inculpate people?

The fact is, our good Finance Minister once upon a time used to enjoy good South Indian food. He has given us a meduvada Bill – a Bill with a big hole in the middle of it. Like the meduvada, we are seeing a big hole — the lack of means of obtaining information about those whom we want to actually prosecute. There is a big hole in the middle of the Bill. You can announce jail, you can announce fines, but you cannot fine or jail unknown people. Do you have the names of people or do you have the means of getting them? 

The third flaw is, this Bill gives unbridled powers to the tax authorities, assessing officers, Enforcement Directorate, CBDT and others, overlooking the great failures of tax administration in our country. The Bill is essentially recreating the Inspector Raj of the pre-liberalisation days.

The fact is, this is a Government that has disempowered most of its Ministers, that has bypassed those bureaucrats except the ones who are in the PMO. The only people who are getting new powers now in this Government are the taxmen. The fact is that they have been given judicial powers, powers to scrutinise files for 16 years, given the right to levy penalties, powers to make people criminally liable, etc. Essentially, we are going to drive people away from India. We will end up with more NRIs. But unlike the ones which my colleague, Shri Deependra Singh Hooda mentioned, these ones will not come back to this kind of tax tyranny. 

My bigger worry is that this will drive away businesses if this law applies to businesses also. It does not square with the Government’s vaunted determination to improve India’s ease of doing business.

There are no safeguards for protecting the innocent people, those who give inadequate information in good faith will still be punished. We are completely overlooking the very quality of tax administration in this country. There are real questions about the integrity of our tax process. We have heard today that there are vacancies in the Enforcement Directorate. One concrete example is that the Government has missed its deadline of 31st March, 2015 for prosecuting black money holders abroad under the existing Income Tax Act, 1961. Out of 427 actionable cases in the HSBC list, SIT has prosecuted only 200 of them. So, do you have the capacity to prosecute people? If you do not have the capacity even to go after the names which you have got, what are you going to do with this new Bill? 

The fourth and final flaw is an important flaw and that is, this is not part of an overall strategy. An overall strategy should be on control of generation of black money which will need the Government to cooperate with the Opposition and work with the House for a comprehensive approach that includes serious tax reforms and rationalisation; real estate practices (and there are a whole series of things which need to be done there.); that includes improving the quality of education so that black money does not come into the education system; that includes black money in politics, which we never talk about in this House, but the fact is that politics is awash in black money; and of course, that includes action against hawala networks. No such larger comprehensive strategy has been articulated by the Government. 

What this Bill is doing for the Government is, instead, like modern dating. It offers short term gratification without long term commitment or long term consequences. 

So, finally, let me beg the Government that – we will support the Bill – they should be honest with the citizens. This Bill is an attempt to look tough, seem to be taking decisive action but it is not anchored or integrated into such a sensible strategy.

I want to tell the Government that they should please fix these flaws in their future actions and come back to us with a comprehensive approach. 

Is Bill ke madhyam se Kale dhan kaj o paisa wapas ayega, usme se kisi garib kisan ke Jan Dhan Yojana wale zero-balance account  main Rs. 15 lakh jama kar dijeye.