War On Black Money: Role Of The Government

By Roop Choudhary

Editor’s Note: Black money is so much a part of our present day white economy; just like a brain tumour, you try to remove the tumour – you kill the patient. In this research paper, I’ve gone over the details regarding “black money” with a fine toothed comb.

The money accumulated in the hands of a very few people due to tax evasion, illegal business deals, crimes, etc., is called black money. Nearly 6 Lakh Crore Rupees has been the out flux in the year 2012. A “Special Investigation Team” has been set-up by the government to further investigate the matter. To this date, merely 97 names have been found and a notice has been sent to them.

The hope of getting all this money back to our nation, seems too grand to be true. It’s a fairytale spun by the adults to make peace with the idea of today’s grim economic system. But, if we do gain success in bringing this stashed away amount to the country, it could be used in a billion different ways to ensure our nation’s overall development. Apart from hiking our economy, it would boost the development process, ensure better medical aid, educational facilities and betterment of the Indian masses.

Further, the negative impacts of this out flux and how can this economic and social evil be curbed have 0been discussed. Also, the much hyped, 2G Spectrum Scam of 2008 has been critically analysed and how the government played a role in the scam. This very scam found it’s place on the 2nd number in the list of “Top Ten Abuses of Power”, by the TIME magazine, 2011.

INTRODUCTION

Black money is defined as “money usually obtained illegally.” It is generated by activities that are kept secret and not accounted for the fiscal authorities. There are usually two ways to generate black money; one is through illegal practices like the drug trade, match-fixing, trading of weapons, crime, terrorism, corruption, etc. The other is when even though money earned through lawful activity isn’t accounted for by failing to declare taxes. Some of this money has seen the trend of being transferred to international bank accounts, like the Swiss bank account, HSBC Geneva’s branch, etc.

Where is Black money being used? The elections, air travel, tour, restaurants, land, jewelry, etc. Who is involved in Black Money? Senior bureaucrats, ministers of export and import, commerce, Chief Ministers, top industrialists, horse traders, liquor traders, drug dealers, clerks and peons working for the Government, etc. This evil has now overshadowed the Indian society – economically, socially and morally. Due to the pressure that the “urban life” has to offer, we often fall prey to such practices and contribute to the millions that have been stashed away.

The fight against “Black Money” began decades back and still continues; only showcasing the inefficiency of the Indian Government. Recently, the Government received the list of all the people who have accounts boasting of a hundred crores from the Swiss bank. But none of these names were revealed to the Media. Even after all this money laundering and the sorry state of our economic affairs, the Government has been trying to keep these offenders’ names in the dark.

Thus, in addition to wealth earned through illegal means, the term black money would also include legal income that is concealed from public authorities:

1. To evade payment of taxes (income tax, excise duty, sales tax, stamp duty, etc);

2. To evade payment of other statutory contributions;

3. To evade compliance with the provisions of industrial laws such as the Industrial Dispute Act 1947, Minimum Wages Act 1948, Payment of Bonus Act 1936, Factories Act 1948, and Contract Labour (Regulation and Abolition) Act 1970, and,

4. To evade compliance with other laws and administrative procedures.

INDIAN PERSPECTIVE ON “BLACK MONEY”

The international think tank, Global Financial Integrity (GFI), has ranked India as the world’s third top country on the Black Money List. As per GIF’s, 2014 Annual Global Update on Illicit Financial Flows report an estimated $94.76 billion (nearly Rs 6 lakh crore) illicit wealth outflows in 2012. As a result, the cumulative illicit money moving out of the country over a ten-year period from 2003 to 2012 has risen to $439.59 billion (Rs 28 lakh crore).

The estimate of these huge illegal money flow follows a Supreme Court-constituted Special Investigation Team (SIT) tracing Rs 4,479 crore in the accounts of Indians figuring in a list of account holders of HSBC’s Geneva branch. Besides, the SIT has also disclosed tracing unaccounted wealth worth Rs 14,958 crore within India, which are now being investigated by the Enforcement Directorate and the Income Tax Department. This is money that is earned and transferred illegally abroad in tax havens, such as the Cayman Islands, typically to avoid taxes. About a third of India’s black money transactions are believed to be in real estate, followed by manufacturing and purchasing gold and consumer goods.

The government of Prime Minister Narendra Modi, whose one of the main agendas has been “eradication of black money” has asked the Central Board of Direct Taxes to make new rules regarding the banks to ascertain the actual owners of the bank accounts. This regime will be applicable next financial year onwards. A new framework of automatic information exchange is being set up, which will strengthen the country’s tax authorities as it entails flow of data on bank accounts, interest income, royalties and dividend besides account balances. This implies that 2018 onwards, India will be able to get data from tax havens such as the British Virgin Islands, Cayman Islands, and others.

Tax evasion could soon become a prosecutable offense inviting jail term for offenders. Till date, tax evaders can admit their wrongdoing to the authorities when caught and escape jail term by agreeing to pay the evaded tax along with hefty penalty under the Income Tax Act. If the person fails to pay the tax and penalty for evading tax, then the authorities can seize his/her assets for the realization of the dues. The SIT, headed by Justices M B Shah and ArijitPasayat, has suggested making tax evasion a crime under PMLA, 2002. Former attorney general Soli J Sorabjee, who appeared on behalf of the SIT, told the court that ‘tax evasion’ was not a predicate offense under the list of prosecutable offenses in the PMLA list.

If hidden incomes of Rs. 25 lakh crore were to be disclosed and taxed at 30%, it would generate Rs. 8.5 lakh crore, enough to build a 2,000-bed super-specialty hospital in each of India’s 626 districts. According to the White Paper published on Black Money in May 2012, the total amount of deposits of Indian nationals in all Swiss banks, by the end of 2010, was US $2.1 billion (Rupees 9,295 crore). The source of this information was cited as the Swiss Ministry of External Affairs.

The Government of India also claimed in May 2012 that the total deposits of citizens of India in Swiss banks constitute approximately only 0.13 percent of the total bank deposits of all countries. It is a sorry state in our country where the money laundering has reached its limit and yet no stringent laws prevail. Also, we as citizens either directly or indirectly have contributed to this humongous amount of black money stashed in various accounts across the world.

INDIAN “BLACK MONEY” IN SWISS BANK

India has slipped to 70th position in terms of foreign money lying with Swiss banks and accounts for a meager 0.13 percent of total global wealth held in the country’s banking system. According to White Paper on Black Money in India report, published in May 2012, Swiss National Bank estimates that the total amount of deposits in all Swiss banks, at the end of 2010, by citizens of India were CHF 1.95 billion (INR 92.95 billion, US$2.1 billion). The government of India had not sent any inquiry regarding the details of the bank account holders since independence until recently.

This money belongs to our country. From these funds, we can repay 13 times of our country’s foreign debt. The interest alone can take care of the center’s yearly budget. People need not pay any taxes and we can pay Rs. 1 lakh to each of 45 crore poor families.

In early 2011, several reports Indian media alleged Swiss Bankers Association officials to have said that the largest depositors of illegal foreign money in Switzerland are Indians.

INDIAN “BLACK MONEY” IN HSBC GENEVA BRANCH

1,195 Indians have bank accounts registered in their names in the HSBC Geneva branch, according to a news report by Times Of India, dated 9th February 2015.

Rs 4,479 crore is held in the accounts owned by Indians, who figured on the HSBC List, and the Income Tax Department has initiated action against 79 of such account holders. Besides, the tax department and other agencies including Enforcement Directorate are probing cases involving unaccounted wealth totaling Rs 14,957.95 crore within India.

Finance Minister Arun Jaitley has stated that the matter of the HSBC bank account is being looked into and that the proceedings regarding this will be completed by March 2015. The prosecution has been initiated in 6 cases for wilful attempts to evading taxes besides show causes have been issued in 10 others. This was recorded and presented before the Supreme Court of India by the Team SIT.

S.I.T. ON BLACK MONEY

Ram Jethmalani, noted jurist and former Law Minister and many other well-known citizens of the country filed a Writ Petition in the Supreme Court of India seeking the court’s orders to try getting back India’s black money stashed in various accounts in different tax havens. Also, to strengthen the government’s framework and make more stringent laws for tax offenders or people involved in money laundering.

The SC on 4 July 2011, ordered the formation of a Special Investigating Team (SIT) headed by former SC judge BP Jeevan Reddy to monitor investigations dealing with the black money. This body would report to the SC directly and no other agency will be involved in this. The two-judge bench observed that the failure of the government to control the phenomenon of black money is an indication of weakness and softness of the government.

Justice Dattu appreciating counsel Ram Jethmalani said, “If the money is brought back, we need not pay 30 percent tax.” Pulling up the government for its inaction on bringing the money back, the Court said, “There will be a body (SIT) because you have failed. Were you not aware where the black money is deposited? You know it very well.” This was observed while rejecting the center’s plea seeking recall for the institution of the Special Investigation Team.

In April 2014 names of 26 people were disclosed to the Supreme Court who had accounts in banks in Liechtenstein, as revealed to India by the German government. Then the Indian government ordered to figure out the names of all the people holding accounts in foreign banks. The SIT committee following the orders submitted the names of 627 people to the Supreme Court of India in a sealed envelope on 29th October 2014.

DOUBLE TAXATION AGREEMENTS

Double taxation is the levying of a tax by two or more countries/states on the same amount of income. Usually, this double taxation is dealt with by signing treaties between nations. India has a Double Taxation Avoidance Agreement with 88 countries, out of which 85 are already into force.

Under the Income Tax Act, 1961 there are two provisions, Section 90 and Section 91, which provide specific relief to taxpayers to save them from double taxation. Section 90 is for taxpayers who have paid the tax to a country with which India has signed DTAA, while Section 91 provides relief to taxpayers who have paid tax to a country with which India has not signed a DTAA. Thus, India gives relief to both kinds of taxpayers.

“WHITE PAPER ON BLACK MONEY” REPORT

The report was published in May 2012 by the Ministry of Finance, Department of Revenue and Central Board of Direct Taxes. It presents the different facets of black money and its complex relationship with policy and the administrative regime in the country. It also reflects upon the policy options and strategies that the Government has been pursuing in the context of recent initiatives, or need to take up in the near future, to address the issue of black money and corruption in public life.

The table below shows the figures for the first few Black Money issues.

YEAR                          Estimate of Black Money (in crores)                        Percent of GDP
1975-1976                             9,958 to 11,870                                                       15 to 18

1980-1981                           20,362 to 23,678                                                       18 to 21

1983-1984                          31,584 to 36,784                                                       19 to 21

 

Many saw the “White Paper on Black Money” as a tad more than the Government’s attempt to show it’s a commitment towards tackling the Black Money issue. But details like the estimates on India’s Black economy size, names of the offenders, etc. It suggests that the figures floating in the public are exaggerated and the exact figures will be given by the taxation department. The option of “Tax Amnesty” has been proposed to lure back the Black Money to India.

“Tax amnesty is an opportunity for a particular group of taxpayers to disclose incomplete or unreported information about previous tax periods. Tax amnesty requires a specific group of taxpayers to pay certain amount relating to previous tax liability including penalties and interest without fear of criminal prosecution. In certain cases, the legislation imposes greater penalties on those who are eligible for amnesty but do not take it. Generally, when an authority begins an investigation about the past due to tax, tax amnesty expires.”

But this could have ill effects too on our economy. Some fear this might encourage the generation of more Black Money. Also, the public’s opinion is against the proposal of Tax Amnesty. Other suggestions to bring back the money that’s stashed away, include greater international cooperation on detecting and controlling tax avoidance and strengthening anti-money laundering legislation.

Many of our childhood stories ended with, “And they lived happily ever after,” but in this age of skepticism, even our toddlers have stopped taking them seriously. Indian adults, however, very vehemently have been promoting a different version of “happily ever after”.

This fairy-tale is about, billions of dollars of “black money” that has been siphoned out of India. Once a “strong government” (perhaps the Narendra Modi government?) takes the magic wand and brings this money home, India ceases to be a poor country and takes its rightful place among the superpowers of the world. The first major move by India’s new prime minister, Narendra Modi, last month was to appoint a special investigative team (SIT) to look into the black money issue, as he promised in his election campaign.

Perhaps the memories of once being a fairly prosperous society that had its wealth slowly drained by two centuries of colonialism, or the legitimate resentment felt towards businessmen, and politicians by salaried Indians, who constitute the bulk of India’s very tiny income-tax base, explains why middle-class Indians take an unorthodox pride in sticking a number on the amount of wealth at stake in the black-money dispute.

Indian opinion on black money is consistently inflamed by people like the lawyer Ram Jethmalani, the main figure behind a 2009 petition that led the Supreme Court of India to direct the Indian government to set up a special task force to recover India’s lost money—and moralized in a 50-plus-page judgment on what the neoliberal order had done to make selfish monsters of Indians.

“One of the best places in which to invest money in India, not Switzerland or the US or any western destination,” the straight-talking economics columnist Swaminathan Aiyar wrote.

“Sometimes it appears that the narrative has become so distant from reality that ‘bringing back’ black money is being seen as a coherent act of economic policy reform,” the Business Standard argued in an editorial. “… The biggest step that the government should take on ending the black economy is to make it more difficult for people to bring black money back to India. That is, in the end, what tax evaders wish to do with their unaccounted-for cash—put it back to work in the economy they know best, not store it in distant vaults.”
But the advice, or the latest reports or even the recent studied deter the Indians from fantasizing a life in the Burj Khalifa or supporting sports’ teams or having a nice Rolls Royce in their garage.

HOW CAN “BLACK MONEY” BE USED FOR THE NATION?

If the Black Money, ever does come back to the nation, it will transform the Indian economy. Imagine the billions an trillions we have lost, that could have been used for the nation’s development. The backflow will not only increase the economic scales but also help us in different spheres of the much-needed development. For example, education schemes, better government facilities like Hospitals, Colleges, eradication of poverty, better living standards for people, no tax for a few years, better functioning governments and obviously, a lesson to all the corrupt politicians and businessmen.

According to several economists and financial experts, bank deposits in the territory of Switzerland by nationals of India total upwards of $1.4 billion. That is close to the nominal GDP of India today. IT kind of gives credence to the widely held belief that $1.456 trillion of Indian money is parked in Swiss bank vaults. According to the numbers given by CIA Factbook, India as in 2010, had an external debt amount of $237 billion.

On the backflow of this Black Money, the debt could be paid off leaving the nation with about 1.181 trillion even after including the interest rates.

A Goldman Sachs study in 2010 has reported that India would need to invest $1 trillion in economic and social infrastructure to sustain an 8 to 9 percent growth momentum and to overcome its problems. However, in the report, the investment banker clearly mentions that this $1 trillion includes government funding, private enterprise as well as foreign investment.

India is in need of better infrastructure and knowing our corrupt Politicians, unlike in the case of China or other countries, will be built only using a public-private partnership model. In few sectors like telecom, airports, and power, the model of public-private partnership has been successfully working. In case of developments of ports, roads, railways and urban transportation, the models are still evolving and being considered.

Assuming up to 70 percent of the funding comes from the government and the rest from other partners, India would invest about $ 600-700 billion in this sector’s development. The bulk of the government’s investment should be in water treatment, sanitation, waste management, renewable energy, health, education, urban infrastructure and other such allied fields for the development of the nation.

India is one of the hungriest nations in the world. It is ranked 67th out of 84 countries listed and ranked on the Global Hunger Index report, 2010. India accounts for about 42 percent of the world’s underweight children. Unless India can ensure food security for all the people, its claim for a bigger role in the world’s economy will be taken with a small pinch, if not a lump, of salt. In that regard, the universalization of the Public Distribution System is the easiest and surest way to ensure food security to the people.

Now, we are left with $ 481 billion. Taking into account inflation over the next ten years, a figure of $ 300 billion will be enough to take all Indians out of the hunger trap. With quality healthcare and social infrastructure, India can then start looking like a developed nation. Out of the remaining $181 billion, $60 billion should go in strengthening our defense capabilities. Over and above the already-approved $100 billion procurement plan, that should give us one of the meanest fighting forces in the world. The remaining $ 121 billion money should be used to fund higher education, cutting-edge scientific and social research institutes and exclusive scientific projects.

IMPACT OF OUT-FLUX OF BLACK MONEY

The out-flux of the “Black Money” from our nation has damaged the economy by far. Some of the major ill effects of this as discussed below:

1. LESS TAX FOR THE GOVERNMENT:

Many times, the Indian Government has failed to collect the estimated amount of tax from the people of our country and for this, credit has to go to the black money driven-underground economy. Recently, a report was submitted to the Finance Ministry of India that divides the spread of black money in different sectors like real estate, mining, telecom etc. The study, headed by NIPFP chief P. Kavita Rao, explains how illicit wealth is likely to exceed 10% of GDP in the near future.

2. INFLATION:

When black money is out in the market, the amount of money in the system is higher than the Government expected. This causes the prices of commodities to increase to a level way beyond normal. This is a direct result of people having more money, offering more money on specific items to indulge in luxuries. Even if the Government tries to control the credit flow in the market by taking necessary measures, the amount of black money present upsets any such move, resulting in a sort of pressure on the economy.

3. MASS POVERTY:

The distribution of wealth and income in our country has been severely affected by the growth of the underground economy. The common people get affected indirectly in so many ways. The tax evaders are keeping the money away from the deserved. If all the black money in the tax havens is recovered and used by the Indian government, all the outstanding liabilities of the country could be paid off and money would still be left for spending. We could bridge the gap between the poor and rich and work towards a better and sustained future.

4. LACK OF TECHNOLOGY:

Due to the existence of black money, India is facing the problem of shortage of capital in the economy. This has the direct impact on the upgradation and maintenance of technology in all sectors. The major reason behind such backwardness is the parallel economy i.e. all the black money stashed in various bank vaults.

5. IMPACT ON GROWTH DUE TO INVESTMENT IN GOLD, JEWELLERY, PROPERTY, etc.:

People who are looking to turn black money into white money are largely investing in precious metals like Gold and other jewellery. One reason for people to invest in gold is that it is hard to trace. People in black market may buy gold bars, coins, jewelry, etc. because one can buy gold easily and can be converted back to money anytime.

This flow of underground money has caused the Indian economy to stall on its growth. It is estimated that if all the money in the underground economy could be diverted to our main economy, our economy would grow by more than thrice in no time.

6. CORRUPTION:

While corruption creates black money in the economy, it can also be a result of the growing underground market. People with black money are able to bribe the administrators and politicians to get what they want. By doing this, they are able to get what they want and others are pushed down the stack, creating a bridge which is hard to cover up. Also, this results in unavailability of many resources and thus, inflation in the market.

7. REAL ESTATE:

When people with deep pockets are ready to pay more for a piece of land, the price of surrounding land also tends to increase; thus artificially inflating the prices of an entire area. Generally, people involved in black money market are always ready to pay more for a piece of land as this helps in converting their coloured money to legal (white) money.

8. SAFE HAVENS ABROAD:

The black money generated in India is kept in foreign tax havens like the Swiss Bank, HSBC Geneva, etc. For this, money has to be transferred from India to other countries through secret channels. Under-invoicing of exports and over-invoicing of imports are two of the main methods used by black money holders for transferring money overseas.

9. INCREASED ANTI-SOCIAL ACTIVITY:

It is no doubt that black money is a curse to any country. Black money is always promoting anti-social activities in the society. Bribery, mentioned earlier, is only one example. The anti-social effects of black money include activities like terrorism, a huge threat already to our country, drug dealing, trading of weapons, etc.

HOW TO CURB THE “BLACK MONEY” ISSUES?

1. LOWERED TAX SCALES:

The tax rates were high that it encouraged many people to be involved in tax evasion. Since this became an evident reason for increasing black money, the Government took steps to reduce the tax rates. However, the fact remains that with the lowering of tax rates and the introduction of new laws, new opportunities opened up for tax evasion. A global presence of black money also started to help these people in pursuing the crime.

2. TAX DEDUCTION ON HIGH VALUE TRANSACTIONS:

In the recent budget, the Finance Minister introduced TDS, Tax Deducted at Source, to all transactions involving immovable assets Rs 50lakhs or above. He also introduced a new tax, Commodities Transaction Tax or CTT, hoping it will help in keeping a trail of bullion trade.

3. AMNESTY SCHEME:

The Amnesty Schemes, introduced by the Finance Ministry from time to time, allows tax defaulters to pay a tax, waiving the penalty and interest. Using these schemes, a defaulter could disclose their wealth and convert them to white money. No questions will be asked to the defaulter and the details will be kept private. These schemes help Government to rake up the taxes and bring a huge amount to legal money back into the Indian market.

4. PUNISHING CORRUPT OFFICIALS:

The Government of India has taken and continues to take stringent actions against those involved in corruption. The actions against the Telecom Minister A.Raja, during his tenure the 2G spectrum scam took place, is an example. The Government is keen to inflict of insecurity to those involved with corruption and black money market.

If the Government continues to act strong against the corrupted, India will soon be a better country and maybe even a world leader in the economy.

5. CASH KEPT AT HOME LIMITED:

According to the recent legal developments regarding the money laundering issues, the government has passed a new law. It says that a person cannot keep more than Rs 15 Lakhs either in cash or kind at his residence. If anyone caught during an income tax raid withy more than the afore mentioned amount, he/she will be taken up for a trial.

2G SPECTRUM CASE – AN ANALYSIS

The 2G Spectrum Scam, which happened in the year 2008, came as a shock to the Indian population. It has been placed on number 2 in the list of “Top Ten Abuses of Power”, right after the Watergate Scam by TIME Magazine, 2011. According to another internet source, it is ranked 2nd following the Indian Coal Allocation Scam. This 2G Scam was economically the size of 1.76 Lakh Crore Rupees.

The 2G spectrum scam was a major telecommunications scam and political injustice in which politicians and top-notch government officials of India illegally undercharged mobile telephone companies for frequency allocation licenses, which they then used to create 2G spectrum subscriptions for mobiles. When the CBI investigated further, Kapil Sibal, Minister of telecommunications and IT, denied all allegations and stated in a press conference that “zero loss” had been incurred. The phrase used here, “zero loss” can simply mean that the frequencies were then sold at a price not less than the purchase costs. However, this nowhere signifies that the actions were of a legitimate nature.

Later, a PIL was reportedly filed regarding this scam, on which the Supreme Court had then decided that the actions were “unconstitutional and arbitrary” and all 122 license were quashed. Further, the “zero loss” theory lost its value when the Supreme Court directed the Governement of India to revise the rates. This estimated the value of the spectrum to be INR 28 billion per MHz, close to the estimate of CAG, INR 33.5 billion.

To make the allocation of license a fair deal, the government had devised the way of “First come- First serve” basis. But the alleged politicians, bureaucrats and businessmen manipulated the rules to suit their whims and fancies. The companies were allotted the time slot of only a few hours to submit their cheques and Letter of Intent, whereas, the companies tipped by A. Raja, were already ready with the required documents. When the scam unfolded, some of these executives were also sent to jail along with the ministers.

The people and companies involved in this scam were;

1. A Raja, Ex-Telecommunications and IT Minister,

2. M K Kanimozhi, Rajya Sabha MP,

3. Arun Shourie, Minister Telecommunications and IT, 2003 BJP,

4. Pramod Mahajan, Minister Telecommunications and IT, 1999 to 2003,

5. Siddharth Behure, Former Telecom Secretary,

6. Pradip Baijal, headed TRAI,

7. R K Chandolia, Raja’s private secretary,

8. Ratan Tata, Chairman of Tata and Sons,

9. Anil Ambani, Chairman of Reliance Telecommunications,

10. Nira Radia, Corporate lobbyist,

11. Barkha Dutt,

12. Vir Sanghvi,

13. Unitech,

14. Swan Telecoms,

15. Videocon Telecommunications Limited,

16. S Tel,

17. Reliance Communications,

18. Loop Mobiles,

19. Tata Communications,

20. Vodafone Essar,

21. Dishten Wireless,

22. Allianz Infra,

23. Sistema Shyam Mobile (MTS) – Sistema Mobile Russia.

There have been speculations that Ex-Telecommunications and IT Minister, A Raja could have received approximately INR 30 billion as kickbacks from the favoured firms. Reportedly, this money was stashed under his wife’s name in bank accounts in Seychelles and Mauritius. The modus operandi adopted by him was that he shifted the date from 1st October, 2007 to 25th September, 2007 which created a confusion. This confusion led to delay in submission of Letter of Intent and cheques by all companies except Swan and Unitech. The “First come-First Serve” basis was manipulated in this manner and only two companies got the 2G license.

Similarly, M K Kanimozhi, has been allegedly called the “active brain” behind the entire scam. She holds a 20% stake in the family owned Kalaignar TV and was an active participant in the scam. This was to route INR 2 billion to Kalaignar TV by DB Realty channel promoter ShahidBalwa. The CBI alleged that A Raja pursued to get the channel registered under the Ministry of Information and Broadcasting, but also to get it into DTH operator Tata Sky’s circuit.

Also, the rates quoted by A Raja were those of the nascent stage of Telecommunications and IT industry in the country. The companies that got the license had no prior telecom experiences and Swan didn’t even meet the eligibility criteria. The 45% stake of the license obtained by Swan was sold off to an UAE company and 60% of the stake obtained by Unitech were sold to a Norway based company.

Siddharth Behura has been accused of physically blocking with the help of RK Chandolia out other telecom companies by shutting down the counters, when the declared deadline was between 1530 hours and 1630 hours.
In conclusion, this scam was blow to the Telecom sector as well as the Economic sector. The involvement of all these politicians clearly signifies that corruption has crept deep inside our system.

Currently, A Raja holds approximately 4,800 Crore Rupees in four different Swiss Bank Accounts. The money that was siphoned out with the help of the 2G Spectrum Scam, has not been tracked as yet. A special investigation team was formed by the CBI for further investigation. A Raja was arrested for overlooking the instructions by the Finance Ministry, Telecom Ministry as well as the TRAI and being partial in his decisions.

P Chidambaram, then Minister of Home Affairs had also been accused of active participation in the scam but no actual proof was found against him. Some reports show that Ex-Prime Minister, Manmohan Singh was equally responsible as he was negligent and had he presided over this matter properly, the entire scam could have been avoided. While other reports show that the Ex-Prime Minister, was in no way responsible and had acted meticulously to promote the 2G Spectrum.

The government played a crucial role in this scam and cheated on the Indian population for it’s selfish motives.

RECOMMENDATIONS

According to recent news updates, Finance Minister, Arun Jaitley shall announce a new policy to combat the out flux of black money from India. The Special Investigation Team (SIT) has suggested a few points that are being considered for implementation. Firstly, tax evasion would be made a crime punishable under the Indian law.

Secondly, the utilisation scope of the Permanent Account Number (PAN) issued by the Income Tax Department could be widened.

Thirdly, a more intricate and robust framework should be devised to avoid discrepancies between agencies. Next, a “Know Your Customer” registry could be created with all the essential databases so that tax evaders and other such criminals are caught easily. The amendment of the Foreign Exchange Management Act (FEMA) will also be taken up. Lastly, it will fine tune itself with other nations to curb money laundering, so that India as a nation, isn’t only a participant in this fight but also leads it.

On February 24, 2015, the IT Department surveyed the HSBC Mumbai Port branch and allegedly a lot of discrepancies have cropped up, which might cause the bank to pay penalties. Separately, the UK-based bank said it has also received “subpoenas and requests for information” from the US and other authorities with respect to certain US-based clients of an HSBC company in India.

Black money or the illegal money circulating in the parallel economy is a big menace for the Indian economy. It is also an originator of a big loss in the tax-revenues for the government of India. Because of the existence of the black money in the Indian economy, the per capita income of the people has not been increasing in line with the other advanced countries despite the liberal measures taken by the government of India since the early 1990s.

Even after several decades of economic planning and push in the right direction, India still continues in the same state as an underdeveloped economy in terms of per capita income and the reason behind it is the existence of black money. The elimination of black money from the Indian economy is needed and it will benefit the economy in more than one way. It will also help in creating extra revenues for the government.

Formatted on February 15th, 2019.

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