Black money stashed in illicit/illegal accounts in foreign banks
has been a burning issue. Many times, it has assumed political hue and is only used
to score political brownie points against each other, thereby creating a
general impression in the minds of public that no Government is serious in
going after the holders of these illicit/illegal account holders in foreign
banks.
Some efforts are made to extract information under the provisions
of Double Taxation Avoidance Agreement (DTAA) entered into by India with
various countries. However, these efforts can at best be described as ‘some
semblance of action is better than no action’.
Basically, the object of DTAA is to provide for the tax claims of
two Governments both legitimately interested in taxing a particular source of
income either by assigning to one of the two the whole claim or else by
prescribing the basis on which the tax claim is to be shared between them. DTAA
seeks to eliminate double taxation of certain income where a resident of one
country derives income from a source in another country and aim to ensure
facilitating international trade and commerce, flow of investments as also
equitable collection of revenue. The DTAA tend to achieve the aforesaid aims
by:-
a. clarifying where a
country of source may tax non-resident in respect of certain types of income;
b. limiting rate of tax a country of source may
apply to certain types of income; and
c. Providing foreign
tax credits in the country of residence against taxes paid in that country on income
having source in other country.
The basic object of DTAA is to prevent tax avoidance by exchanging
information. In my earlier blog, I have explained that under the relevant
clause of DTAA dealing with exchange of information, the Competent Authorities
of the contracting states exchange information
- As is necessary for
carrying out the provisions of the
- Tax agreement, or
- Domestic laws of the
contracting states concerning
- Taxes covered by the
tax agreement, in particular for
- Prevention of fraud
or evasion of such taxes
- Not restricted by
article 1.
Thus the scope for exchange of information appears to be prima facie restricted to this area.
What is the way out for speedy disclosure of names of the persons who
have stashed their ill-gotten wealth in foreign bank accounts?
Is there any other international convention that is more potent
than DTAA?
How about invoking the United Nations Convention against
Corruption?
After all the ill-gotten money stashed in foreign bank accounts is essentially
the result of corruption. Money laundering through secret commission, over
invoicing in case of imports, under invoicing in case of exports, havala transaction etc. are only the
modes of transferring the money to these accounts.
In its resolution 55/61 of 4 December 2000, the General Assembly
recognized that an effective international legal instrument against corruption,
independent of the United Nations Convention against Transnational Organized
Crime (resolution 55/25, annex I) was desirable and decided to establish an ad
hoc committee for the negotiation of such an instrument in Vienna at the
headquarters of the United Nations Office on Drugs and Crime.
The
text of the United Nations Convention against Corruption was negotiated during
seven sessions of the Ad Hoc Committee for the Negotiation of the Convention
against Corruption, held between 21 January 2002 and 1 October 2003.
The
Convention approved by the Ad Hoc Committee was adopted by the General Assembly
by resolution 58/4 of 31 October 2003. The General Assembly, in its resolution
57/169 of 18 December 2002, accepted the offer of the Government of Mexico to
host a high-level political signing conference in Merida for the purpose of
signing the United Nations Convention against Corruption.
In
accordance with article 68 (1) of resolution 58/4, the United Nations
Convention against Corruption entered into force on 14 December 2005. A
Conference of the States Parties is established to review implementation and
facilitate activities required by the Convention.
Convention highlights
Prevention
Corruption
can be prosecuted after the fact, but first and foremost, it requires
prevention. An entire chapter of the Convention is dedicated to prevention,
with measures directed at both the public and private sectors. These include
model preventive policies, such as the establishment of anticorruption bodies
and enhanced transparency in the financing of election campaigns and political
parties. States must endeavour to ensure that their public services are subject
to safeguards that promote efficiency, transparency and recruitment based on
merit. Once recruited, public servants should be subject to codes of conduct,
requirements for financial and other disclosures, and appropriate disciplinary
measures. Transparency and accountability in matters of public finance must
also be promoted, and specific requirements are established for the prevention
of corruption, in the particularly critical areas of the public sector, such as
the judiciary and public procurement. Those who use public services must expect
a high standard of conduct from their public servants. Preventing public
corruption also requires an effort from all members of society at large. For these
reasons, the Convention calls on countries to promote actively the involvement
of non-governmental and community-based organizations, as well as other
elements of civil society, and to raise public awareness of corruption and what
can be done about it. Article 5 of the Convention enjoins each State Party to
establish and promote effective practices aimed at the prevention of
corruption.
Criminalization
The
Convention requires countries to establish criminal and other offences to cover
a wide range of acts of corruption, if these are not already crimes under
domestic law. In some cases, States are legally obliged to establish offences;
in other cases, in order to take into account differences in domestic law, they
are required to consider doing so. The Convention goes beyond previous
instruments of this kind, criminalizing not only basic forms of corruption such
as bribery and the embezzlement of public funds, but also trading in influence
and the concealment and laundering of the proceeds of corruption. Offences
committed in support of corruption, including money-laundering and obstructing
justice, are also dealt with. Convention offences also deal with the
problematic areas of private-sector corruption.
International
cooperation
Countries
agreed to cooperate with one another in every aspect of the fight against
corruption, including prevention, investigation, and the prosecution of
offenders. Countries are bound by the Convention to render specific forms of
mutual legal assistance in gathering and transferring evidence for use in
court, to extradite offenders. Countries are also required to undertake
measures which will support the tracing, freezing, seizure and confiscation of
the proceeds of corruption.
Asset
recovery
In
a major breakthrough, countries agreed on asset-recovery, which is stated
explicitly as a fundamental principle of the Convention. This is a particularly
important issue for many developing countries where high-level corruption has
plundered the national wealth, and where resources are badly needed for
reconstruction and the rehabilitation of societies under new governments.
Reaching agreement on this chapter has involved intensive negotiations, as the
needs of countries seeking the illicit assets had to be reconciled with the
legal and procedural safeguards of the countries whose assistance is sought.
Several
provisions specify how cooperation and assistance will be rendered. In
particular, in the case of embezzlement of public funds, the confiscated
property would be returned to the state requesting it; in the case of proceeds
of any other offence covered by the Convention, the property would be returned
providing the proof of ownership or recognition of the damage caused to a
requesting state; in all other cases, priority consideration would be given to
the return of confiscated property to the requesting state, to the return of
such property to the prior legitimate owners or to compensation of the victims.
Effective
asset-recovery provisions will support the efforts of countries to redress the
worst effects of corruption while sending at the same time, a message to
corrupt officials that there will be no place to hide their illicit assets.
Accordingly, article 51 provides for the return of assets to countries of
origin as a fundamental principle of this Convention. Article 43 obliges state
parties to extend the widest possible cooperation to each other in the
investigation and prosecution of offences defined in the Convention. With
regard to asset recovery in particular, the article provides inter alia that
"In matters of international cooperation, whenever dual criminality is
considered a requirement, it shall be deemed fulfilled irrespective of whether
the laws of the requested State Party place
the offence within the same category of offence or denominate the offence by
the same terminology as the requesting State Party, if the conduct underlying
the offence for which assistance is sought is a criminal offence under the laws
of both States Parties".
We have seen illegal commission
being paid in various defense deals. We have seen various scams like 2G, Coal,
Common Wealth Games, etc. etc. India is admittedly a corrupt nation.
Consider the study prepared by Transparency
International in 2013.
India
ranks among the highly corrupt nations and its rank remains unchanged as
compared to 2012. The list was topped by Denmark and New Zealand as the
cleanest while Somalia emerged as the most corrupt. Though India’s rank remains
unchanged some of its neighbors seem to have improved their ranking on the
corruption index. It’s only Sri Lanka whose rank has further gone down
indicating increasing level of corruption in the island nation.
As
per the 2013 corruption index, Bhutan ranks 31st, Sri Lanka 91, Nepal 116,
Pakistan 127 and Bangladesh 136.
In
2012, Bhutan stood at 33rd rank, Sri Lanka at 79, Nepal 139, Pakistan 139 and
Bangladesh 144.
India,
however, maintained a status quo with 94 Rank both in 2013 and 2012.
Also
among India’s BRICS peers, it is behind China (80th), South Africa and Brazil (both
72nd). It is, however, better than Russia which is ranked at 127th in the list
that is prepared annually. In 2012, China was ranked on 80, Brazil and South
Africa at 69 and Russia on 133rd rank.
More
than 2/3rd of the 177 countries ranked in the Transparency International (TI)’s
Corruption Perception Index 2013 (CPI 2013), scored below 50, on a scale from 0
(highly corrupt) to 100 (Clean). India had same score as last year of 36.
“Such
a low rank and score could be attributed to recently exposed scams of
corruption involving government officials, politicians and private companies,”
said a statement by the Transparency International India (TII).
Incidentally,
India has signed the UN Convention against Corruption on 9th December 2005. UPA
Government was delaying the ratification of the said Convention. The said Convention
was finally ratified by India on 9th May, 2011.
The
then Prime Minister's explanation for the delay was that the ratification had
been under active consideration since September 2010 and a Group of Ministers
was deputed to oversee the process. He did not explain what was his Government
doing between 2005 to 2010? In a statement issued before his departure for
Kabul, the then Prime Minister further said: “….the ratification is a
reaffirmation of our government's commitment to fight corruption and to
undertake vigorously administrative legal reforms to enable our law-enforcement
agencies to recover the illicit assets stolen by corrupt practices.” It is
unfortunate that Dr. Man Mohan Singh’s Government took six years to ratify a
potent treaty and after ratification, simply slept over it. His actual conduct
in not doing anything against black money and corruption only exposed the
hollowness of his public postures.
When
India has a potent instrument in its hand to go after these scamsters who have
stashed their ill-gotten wealth in foreign bank accounts, what is preventing
India from invoking this UN Convention against Corruption is a point of intrigue.
Why does India prefer to get bogged down by DTAA that essentially has a limited
scope in such matters?
Dr. Man Mohan Singh had his own compulsions
in not invoking the stringent provisions of UN Convention against Corruption to
go after the account holders of illicit/illegal accounts in foreign banks.
What is preventing the present Government
from invoking the UN Convention against Corruption? Will someone from the
Government answer?
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