By appointing a Special Investigation Team to unearth black money stashed away in tax havens abroad, the Narendra Modi government has signalled its intention to pursue in right earnest a matter that the Bharatiya Janata Party has been talking about for years. The United Progressive Alliance regime had been dragging its feet on implementing a July 2011 Supreme Court order to form such a team, and even made a vain bid to stall a court-monitored investigation on the plea that it would erode the authority of the executive. Its stand had given the impression that the previous government — despite its active partnership with other countries in global efforts to get evasion-friendly jurisdictions to shed their obsession with banking secrecy — was not serious about retrieving ill-gotten wealth deposited abroad. The SIT is a high-level committee named by the Supreme Court and is headed by Justice M.B. Shah, a former judge of the Court, with another former apex court judge, Arijit Pasayat, as vice-chairman. It is an inter-agency group that includes the Secretary, Department of Revenue; the Deputy Governor of the Reserve Bank of India, and the heads of the Intelligence Bureau, the Research and Analysis Wing, the Enforcement Directorate, the CBI, the Central Board of Direct Taxes and a few other agencies. Its primary responsibilities include the investigation and prosecution of cases involving unaccounted money.
However, the task is not easy. Mr. Justice Shah himself has spoken about the complexities involved. For one thing, there is no clear estimate of the quantum parked in overseas bank accounts, and it is not known whether all the money that is said to have gone out of the country had not returned in some form through ‘round-tripping’ or participatory notes, or investments in the name of entities and individuals hiding under layers of corporate cover. The government’s 2012 white paper on black money put the amount that Swiss banks owed to India in 2010 at 1.95 billion Swiss Francs, or 0.13 per cent of its total liabilities towards all countries, suggesting that estimates in the range of tens of thousands of crores of rupees may be exaggerated. The SIT must be prepared for the long haul, as its investigation will have to take into account the provisions of existing double taxation avoidance or taxation information exchange agreements that come with a heavy responsibility on recipient-states to limit the use of such information to deciding taxation issues alone. A set of global standards evolved by the OECD on ‘Automatic Exchange of Information in Tax Matters’ is likely to come into force around 2017, and it may be possible for countries like India to obtain information related to bank account balances, interest and dividends so that they could compute capital gains on these sums. Whether the arrangement will result in repatriation of such money is, however, anybody’s guess.