+91 9004418746enquiry.aashah@gmail.com
+91 9004078746aashahs.ias@gmail.com

7 April 2016 Editorial

 

7 APRIL 2016

The Panama paper trail

As the ramifications of the leak of about 11 million secret documents from the Panama-based law firm, Mossack Fonseca, play themselves out, a clear articulation of what the “Panama Papers” hold for the state of global finance today came from U.S. President Barack Obama. Following the joint investigation by the International Consortium of Investigative Journalists and the German newspaper Süddeutsche Zeitung into the leaked papers, Mr. Obama described global tax avoidance as a huge problem. Today, it is perfectly legal in many countries to park money in various kinds of shadowy companies in tax havens. This holds true in India as well, where a lack of clarity persists about the legality of buying offshore companies, a service that is expressly provided by Mossack Fonseca. The lack of clarity exists despite the Reserve Bank of India’s evolving guidelines on offshore remittances and investments since 2004. While the guidelines, such as those of the Liberalised Remittance Scheme, are specific to remittances utilised by residents to service various overseas requirements such as medical treatment and education, they have been modified over time to permit the setting up of 100 per cent subsidiaries and joint ventures within the limit of $250,000 a year. One of the few stipulations is that money cannot be sent to countries identified as “non-cooperative” by the global Financial Action Task Force. (The FATF identified Panama as having taken significant steps to comply with standards related to anti-money laundering and combating the financing of terrorism, in February 2016.) The RBI guidelines have largely been a reactive measure to address flows to tax havens. The investigation into the Panama Papers and the scrutiny of the accounts of Indians named in them should pave the way for yet another tightening of the norms.

The global investigation has revealed large-scale possible tax avoidance and parking of income in shell companies, possibly earned through graft and cronyism by powerful political and governmental actors. The fallout has already begun, with the resignation of one Prime Minister (of Iceland), and a shadow of doubt on the political leadership in countries such as Russia and China. This could be the tip of the iceberg; the leaks relate to just one offshore law firm, even if it is the fourth largest in the world. A global tax avoidance problem requires a coordinated response, and the papers point to the urgent need for much more transparency in the movement of global finance capital. The NDA government has passed the Undisclosed Foreign Income and Assets (Imposition of Tax) Act, 2015 and provided a one-time compliance window to declare foreign assets and income. So far, these steps have yielded little by way of repatriation of transferred assets. The problem of black money stashed overseas has to be dealt with both at the multilateral level, through tightened capital flow norms, and domestically, through a zero tolerance approach to illegal transfers.


The language of violence

The recent prevalence of debates on non-issues such as whether citizens must chant the slogan ‘Bharat Mata ki Jai’ is troubling in itself. When influential public figures inject the language of violence and intimidation into this discourse, they are but attempting to ignite a spark in an already overheated atmosphere. Yoga guru and businessman Baba Ramdev’s remark that but for his respect for the law of the land and the Constitution, lakhs of people would be beheaded for their refusal to chant the slogan can be construed as sheer incitement to violence. That this was a response to All-India Majlis-e-Ittehadul Muslimeen leader Asaduddin Owaisi, who had said he would not utter the words in question “even if a knife were held to my throat”, is hardly a defence. That Ramdev’s remarks were made at a public function organised by the ‘Sadbhavana Sammelan’ in Rohtak, Haryana, where the participants included Himachal Pradesh Governor Acharya Dev Vrat, illustrates the brazenness of such bigotry. In tenor and language they contain the ingredients of typical hate speech: appeal to sectarian feelings, incitement to violence and intent to cause discord. Whether it would fall under the ambit of a specific provision in the Indian Penal Code (Section 295A, for instance) is a separate issue, but one well worth examining. But what is of equal importance is the growing feeling that such virulence in speech is met with an accepting silence, or worse, with quiet approbation, by those in political power. BJP president Amit Shah may be right in pointing out that Ramdev is not a member of his party. But in wondering whether the right of free speech does not apply to the yoga guru, he glosses over an important distinction between bona fide forms of free expression and those that could incite violence.

Summarily dismissing the issue, Union Minister M. Venkaiah Naidu chose to say that what really mattered was government policy and not individual opinion. But we live in an environment in which even those who hold office sometimes lack any sense of restraint. For instance, Maharashtra Chief Minister Devendra Fadnavis was reported as saying that those who do not proclaim ‘Bharat Mata ki Jai’ have no right to live in the country. He later claimed that he was misquoted, but maintained that those who refused to chant the slogan had mala fide intentions. Mr. Naidu did distance his government from what both Ramdev and Mr. Fadnavis said, but clearly, not enough is being done to rein in the motormouths and the extremist fringe in his larger parivar. Ironically, Section 295A, which resembles a hate speech provision, is routinely invoked for all the wrong reasons, and has become a tool to harass people such as authors and artists to appease some religious group or the other. If this frequently misused provision has any justification, its use should be restricted to deliberate and malicious acts that can foment violence and discord. It would be well if the likes of Ramdev are made to understand this.

Back to Top