Devil's Advocate: Arun Shourie on black money issue
Karan Thapar / CNN-IBN
Published on Mon, Apr 27, 2009 at 02:07, Updated on Mon, Apr 27, 2009 at 02:39 in Politics section
Karan Thapar: How important is it to bring back money illegally stashed in foreign tax havens? That is the key issue I shall explore with Bharatiya Janata Party (BJP)'s Arun Shourie.
Mr Shourie, perhaps no right thinking person can even question the need to bring back money that is illegally stashed in tax havens abroad, three critical questions arise. What is the sum, how do we bring it back and how easy or difficult would it be? And I want discuss today all three with you.
First, LK Advani on March 29 said that as per credible estimates the sum was somewhere between $500 billion and 1.4 trillion. Where did Mr Advani get these figures from?
Arun Shourie: Actually, several studies have been done. The figures actually are much larger than that i.e. the Indian share that might be there. The Organisation for Economic Co-operation and Development (OECD) paper which was put out on October 2008 cites the range of estimates of money in tax havens. The range of estimates is from $1.5 trillion to $11.5 trillion.
Karan Thapar: But the OECD in fact is about tax abuse rather than illegality per se, tax avoidance and tax evasion.
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Arun Shourie: But, even that is illegal. And therefore, it is an underestimate because, for instance, much of it is from trade data.
Karan Thapar: But that is the international figure. Mr Advani is purported to be the Indian share, but where does he get his figure from? Because all I can find is a floating reference on the net which is less than verified, it is not proven and it is probably speculated.
Arun Shourie:Actually, the estimates come from a study on these illegal flows and there is a chart given about India. It is not in the net, it is actually just a complete study.
Karan Thapar: You mean the Global Financial Integrity Report of 2009?
Arun Shourie: And those figures in my view are underestimates because they are based really on trade data. One of the ways in which it is done is, you look at the trade going from India figures and match with the exporting or importing company's underinvocing and overinvocing. And therefore, they don't take into account the Hawala transactions at all.
Karan Thapar:Which no one knows anything about ?
Arun Shourie: Nobody knows about but everybody knows that they are there. Therefore, the figures would be underestimated.
Karan Thapar: Except that we don't have a figure for them, I will come to the Global Financial Integrity survey in a moments time. First let's concentrate on Mr Advani's figure announced on March 29 of a range between $500 billion and $1.4 trillion. The problem is what he said on March 29, seems to contradict what he wrote to the Prime Minister on April 6, 2008. In that letter to the Prime Minister, he says, “It is widely known that trillions of dollars of Indian money are lying in different tax havens.” How within a year have trillions of dollars reduced to possibly just Rs 500 billion?
Arun Shourie: But supposedly if it is only $500 million, that is enough to double our power capacity immediately.
Karan Thapar: I agree, whatever the figure, it must be brought back.
Arun Shourie: Secondly, we are unfortunately, reckoned in the world by Transparency International for instance as being among the most corrupt countries in the world.
Karan Thapar: But that's an opinion, not a fact.
Arun Shourie: It is an opinion based on conversations with businessmen and others who have probably, to pay these amounts.
Karan Thapar:Let's even accept that as a fact, it still does not give us the concrete figure.
Arun Shourie: Yes, there is no figure of the kind in which you can pinpoint and say yes it is $1.4 trillion. That is why a very wide range has been cited of half a trillion dollars to one-and-half trillion dollars of estimates from different sources.
Karan Thapar: Except for the fact that that range may itself be nothing more than guesstimate. It may be wrong, it may be right. We simply don't know its accuracy.
Arun Shourie: That is why a very big range is being given. But supposing you don't have an estimate even of that particular range, the main point, as you said in the very beginning that no right thinking person would say even if there is a $100 billion lying abroad, it must be brought back.
Karan Thapar: I concede that but the point I am making which I would like you to concede is that Mr Advani's figure or range or call it what you will is nothing more than guesstimate. It is not accurate and therefore it can't be considered reliable. It is a guesstimate at best.
Arun Shourie: All estimates based on trade data will be guesstimates.
Karan Thapar: Let's accept that. Let's then come to the Global Financial Integrity Report, which everyone concedes, is perhaps the best most accurate trend that we have. That report says that between the years 2002 and 2006, somewhere between 22 billion and 27 billion were siphoned out of India which totals up to a figure between 113 billion and 136 billion. If you take that as the most best and accurate account that you have, it is just a fraction of what Mr Advani is talking about. So it doesn't corroborate him.
Arun Shourie: Look at the preceeding period, as you rightly said but just very hurriedly that it is the one estimate for a five-year period. Now, if you look at it through the social sphere which all of us live through of controls and licenses and of punitive tax rates. When the incentive and compulsion to take money out of India was much higher, the economy was small but the compulsion was much greater and that was a period of about 40 to 50 years.
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Karan Thapar: So now you are extrapolating and speculating but again, we don't have any credible firmness to the figure. You accept that?
Arun Shourie: Yes, of course.
Karan Thapar: Let's come to the second important issue, which is to ask, how much of this amount, whatever the amount may be is legal and what part of it is illegal.
Now, Mr Advani again on March 29 quoted Wikipedia to say that the total amount of illicit funds in Swiss Bank accounts in 2001 was 2.6 trillion, it had risen by 2007 to 5.7 trillion. But it turns out that that is not illicit money, although he called it that but that is the total deposit in Swiss Bank accounts. The vast majority of that would actually be legal. So once again, Mr Advani has confused the figure.
Arun Shourie:That's a very interesting point. How do you say vast majority, how do you know? Please answer specifically.
Karan Thapar: On the law of assumption, at least 50 per cent would be.
Arun Shourie: This very phrase of yours which you have invented called the ‘law of assumption’, you try to apply that to the figures that you were saying are not credible at all. You have suddenly invented some new law of nature. You just now have said that you know for a fact that the vast proportion of that must be legal money.
Karan Thapar: Let me put it the other way round. Mr Advani said ever single penny of that was illicit.
Arun Shourie: We have to first find out where you got this new argument on the basis of law of assumption.
Karan Thapar:The law of assumption is that if money is lying in a bank account and if you are talking about the whole of Switzerland, the vast majority won't be legal.
Arun Shourie: Which book of logic do you get this new phrase called the ‘law of assumption’ which you will apply only to Mr Advani 's phrases and not to your phrases.
Karan Thapar:I will tell you why I am applying it. Mr Advani said and I am quoting him explicitly, “That the total amount of money in Swiss Banks was this and it is illicit”. It turns out that what he is talking about is the total size of the deposits and all the deposits can't be illegal.
Arun Shourie:Fine. You assume that the amounts from India are in Swiss Banks, we have to now focus on that. Switzerland is a very minor trading partner of India. Swiss Banks are not being used as clearing houses by Indian traders, emporter, exporters of any kind.
Karan Thapar:What's the conclusion?
Arun Shourie: My conclusion is that the most of the money that Indians would have parked in Swiss Banks would be illegal money which they have taken out of India.
Karan Thapar:Let me repeat what you said. Most of the money which Indians have parked in Swiss Banks would be illegal. Let me point out that 20 million NRI have a right to have accounts in Swiss Banks. Clearly, you can't see that their money is illegal. You don't know.
Arun Shourie:And you don't know how many of those 20 million NRIs have accounts in Switzerland. Do you know?
Karan Thapar: No, therefore you can't see most of the money owned by Indians in Swiss Banks is illegal.
Arun Shourie: And therefore you can't come to a conclusion about other people's estimates when you yourself say that you don't know the number NRIs who have money there. You have just now manufactured another law of assumptions. That is no way to deal with other people's guesstimates either.
Karan Thapar:You said most of the money parked by Indians in Swiss Banks would be illegal. I am saying to you that 20 million NRIs can legally keep accounts there and let me add, since 1992, several resident Indians can legally have accounts in Swiss Banks as well. So how do you come to the conclusion that most Indian money in Switzerland is illegal.
Arun Shourie: That is my assumption as was yours about the 20 million NRIs.
Karan Thapar: Let me then put something else to you. If you were to come to power and go to the Swiss banks or to any other tax haven, chasing what you consider or assume to be illegal money, they would ask you for its proof of illegality before they are prepared to part with it. How will you prove the money is illegal?
Arun Shourie: It is a very interesting point. You first get from them, who are the account holders, how much money do they have.
Karan Thapar:Why would they give that to you?
Arun Shourie: Because they are now under pressure to give this. After they have given it to the United States, in the case of UBS, it is the most secretive and largest Swiss Bank.
Karan Thapar:Because of tax evasion.
Arun Shourie: Not only because of that because of the assumption also behind this thing that much of the terrorists money might have been illegally accounted for. Also, because of the pressure of Green parties in Germany and of the pressure of Scandinavian countries.
Karan Thapar: This is the German way of bribing to get the accounts’ details. Are you proposing that India will bribe its way to the Swiss Banks to get details?
Arun Shourie: I am not proposing that. I am saying we can go by bilateral arrangements. United Kingdom has entered into agreements with 40 such countries in tax havens. United States is entering too. My view has been for a long time, yes we should attempt bilateral arrangements but good circumstances have risen that we can go now for multilateral arrangements through G20. G20 people have now said that they will move against tax havens, including the fact that they will go for sanctions against tax havens. Therefore, we should get together with everybody and go for multilateral arrangements in which these people have to disclose the names and the amounts held.
Karan Thapar:What you are talking about is a process that could take three, four or five years possibly. It is unlikely to happen in 100 days, yet what Mr Advani said on Friday, April 17 in Mumbai that within the 100 days of a BJP government coming into place, he would bring back money illegally parked in tax havens. It was quoted by The Indian Express, a paper you are Editor of.
Arun Shourie: I was the Editor there and dismissed twice. I know that everybody's view is that within the first 100 days, we would take specific steps to get the multilateral arrangements, going we will partner with everybody together.
Karan Thapar:You can't get the money in 100 days?
Arun Shourie: The contrast is that just four days ago, the Swiss ambassador was quoted as saying that till now the Swiss government has not been approached at all.
Karan Thapar: Forgive me, I am not sure if that was four days ago. I think the quotation you are referring to was to a rival economic channel and it happened last year, but you are right, he did say it but I don't think it is four days ago.
Arun Shourie: This was quoted by The Times of India four days ago that as of now we have no request from the Indian government.
Karan Thapar: Why does your party believes that the Congress is dragging its feet over this issue of illegal money stashed in foreign tax havens. Mr Advani said that after you wrote to the Prime Minister last year he received a very evasive reply from the Finance Minister. What was evasive about that reply?
Arun Shourie: There are three reasons because of which I feel the Congress is dragging its feet. I will tell you – one is the fact that since April 2008 when it became known independently on Mr Advani’s letter that Germany is willing to part with them to the countries that requested, and second reason is the kind of argument that they have been giving and third is their record.
Karan Thapar: Can I come back on these reasons. The first reason you gave for believing that the Congress is not trustworthy is that until Mr Advani contacted the Prime Minister they had done nothing but the truth is in the reply to Mr Advani’s letter dated May 16, the then finance minister P Chidambaram had said that in February 2009 – two months before Mr Advani wrote the letter – the Finance Ministry had already been in touch with the German tax office and in fact three days back Pranab Mukherjee has revealed that the German tax office has now shared the details with the Indian Government but they have asked the Government to maintain secrecy.
Arun Shourie: But you forgot to mention the extracts of the letter that The Indian Express had published of the Revenue Secretary who was working under Mr Chidambaram then and works under Mr Mukherjee now. He wrote to the Indian Ambassador that don’t worry in asking the Germans, they might feel offended and might think we are questioning their bonafide. What does that reveal? You forgot to mention that letter.
Karan Thapar: Because after three days when Mr Mukherjee has said that Germans have shared the information, that letter has no significance.
Arun Shourie: Wonderful, then we should persue that and we would judge independent of any political parties and pressurise them to get the names.
Karan Thapar: S Gurumurthy, appointed by Mr Advani to the taskforce he has set up, said to the Rediff.com on April 20 that I believe the lead family of the Congress party is a suspect in the matter of foreign money and that is why the family doesn't want the banks' secrecy to be unveiled. Are you suggesting that Sonia Gandhi, Rahul Gandhi and Priyanka Vadra have stashed money in tax havens.
Arun Shourie: You please ask that to Gurumurthy. He is an articulate person, he can answer all your questions.
Karan Thapar: Doesn’t it sound the same as he is saying?
Arun Shourie: In my view all names must be pursued and the names will come out whoever has the money.
Karan Thapar: As a BJP former minister and a senior leader, do you and your party believe that the Gandhi family has stashed foreign money in tax havens.
Arun Shourie: I will not answer to that question. I only know of record of the Congress party exerting itself to protect the interest and the image of the one family which is their only investment.
Karan Thapar: Do you have your suspicions?
Arun Shourie: On Bofors, I always maintained one thing that somebody indistinguishable from the Gandhi family or person who is very close to them in the public eye would be involved.
Karan Thapar: Would you go beyond that now?
Arun Shourie: No. You can ask Gurumurthy and not by saying that I am contradicting him.
Karan Thapar: Yes, you are not contradicting him but you aren’t even confirming it. It was a pleasure talking to you.