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BJP report: ideal time to join in crusade against tax havens

Special Correspondent

MUMBAI: The interim report of the task force set up by Bharatiya Janata Party’s senior leader L.K. Advani on black money in tax havens abroad, says that India must first realise that this was the ideal time to act and join in the global crusade against secret banks and tax havens.

The report said:

“We recommend that the BJP create a powerful public opinion, which would force those who do not support this measure to come around to support like British Prime Minister Gordon Brown was forced to do after the February G20 preparatory meeting in which he did not extend support for Germany and France.

“India should stop being a silent spectator to the G20 efforts against secret banking and must become an actor, an active player and forthwith change the perception that it is not against secret banking and tax havens.

“India must also urge the German government to provide details of the Indian names from the LGT bank secret records it has accessed from Liechtenstein. It must appoint a special ambassador to work with the G20 specifically to frame India friendly rules to expose secret banking.”

The 16-page report said there was a dramatic change in the global atmosphere on tax havens since a year. Germany, in February 2008, got a secret CD of the LGT bank in Liechtenstein, which contained a long list of tax evaders, including the head of the German Post.

The Organisation for Economic Co-operation and Development (OECD) published a list of tax havens and categorised them according to the level of non-cooperation. In February this year, the U.S. Inland Revenue Service forced the largest Swiss bank, UBS, to part with details of nearly 300 tax evaders and also pay a huge fine of $800 million.

The report referred to several estimates of Indian wealth in these tax havens. The media had reported that the amount could be as high as Rs. 70 lakh crore, while some other estimates pegged it at Rs. 25 lakh crore. Illicit monies were the dirty outcome of modern capitalism. But after the 9/11 attack, the U.S. realised that not just the buccaneers in business but even Osama Bin Laden could also hide his funds in secret havens and use them to bomb the world

Baker’s study

The report quoted the research work of Raymond W Baker, a Harvard MBA and a Brookings scholar, whose book, Capitalism’s Achilles Heel: Dirty Money and How to Renew the Freemarket System, published in 2005 sparked off a huge debate in the U.S. on the linkages between terror, national security and black money.

Mr. Baker estimated that the black money in banks was $11.5 trillion to which, he found, $1 more trillion was being added every year. In the process, the West was getting an annual bounty of $500 billion from developing countries, including India. Even the OECD had accepted the figure of $11.5 trillion.

Mr. Baker heads the Global Financial Integrity (GFI), a watchdog of illicit flow of monies in the world, which has also estimated the illicit wealth from India.

The GFI study shows that during the period from 2002 to 2006, annually $27.3 billion was stashed away from India, making a total of $137.5 billion for the five-year period. That is in five years the report said Indian wealth, amounting to Rs. 6.88 lakh crore, would have slipped out of India.

The report said there was need for a national strategy to deal with this illegal outflow by collecting information from emigration, monitoring high frequency tax havens, becoming a full fledged member of the financial action task force, using financial intelligence sharing for security purposes, providing legislative support, and constituting a high- level task force for this purpose.

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