Why it’s difficult to bring black money back
The government may have revealed the names of three black money account holders, but will it be able to get the money back or catch big fishes who have stashed the illegal money in tax havens across the globe. As of now it seems impossible.
With at least three different lists available with the government as per reports, 720 names in the HSBC list, 26 accounts revealed by the German authorities and some disclosures by the French authorities, the probe is only going to be more complex with minimal results.
The Supreme Court appointed Special Investigation Team on black money headed by retired justice M B Shah has already identified at least 50 tax havens, where Indians may have illegal accounts. The countries include, Caymon Islands, Bermuda Islands, Luxemburg, Mauritius, Singapore, Netherland, Jersey Islands, and several countries in European Union.
And the problem is the technical inability to trace back the money to these individuals or corporates in India. The big corporates or individual businessmen rarely open ‘offshore accounts’ in their own names. And those who do have received too many warnings over the years to compound their offenses and pay their penalties.
The fact that after more than five years of noise over black money, government of India has managed to reveal just three names, bears testimony to this fact. The offshore accounts are mostly opened to ‘hide assets’ by skirting the rules through places that have strong secrecy and jurisdiction rules.
Some of the individuals or company route the money through these tax havens via electronic accounts, where cash does not move in physical form. And then investments are made in a third country, which makes it more difficult to probe. It now involves at least three jurisdictions with an unknown middleman from tax haven.
In many tax havens, offshore companies or trusts could be set up to route or stash the money and ownership of the trust is never disclosed. Many a time, a lawyer represents the trust who is directly never involved in any of the transactions.
After opening a trust or company for as less as $1000 in a tax haven, as per the international consortium of investigative journalists, a person can be hired for another $500 who will be the local owner or nominee director of the firm. Later he gives the power of attorney to the original owner, but his or her name is never mentioned in any of the official documents. This middleman is simultaneously owner or nominee director of scores of other firms or trusts.
