The ‘Panama Papers’ leaks clearly had the potential to trigger global financial and tax reforms. And it has begun. Prime Minister Narendra Modi has put into force a multi-agency investigation to inspect the information flowing out of the panama papers, and plug loopholes. Two most interesting figures to feature in the leaks are Amitabh Bachchan and his Miss Universe daughter-in-law, Aishwarya Rai Bachchan.
While Amitabh Bachchan has rubbished the charges, saying his revered name has been misused, his daughter-in-law has so far maintained stoic silence. Nothing, though, is likely to happen to them, even if they evaded tax. They pay much more than they dodge, so they’ll be ignored, I believe.
Not every portion of the 11.5 million documents leaked from the now infamous Mossack Fonseca, a Panama-based law firm, is illegal, though. Many Indians, around 500 of them, are claiming to have followed the law, paid their taxes. Nobody should believe them just yet, though. It’s too bloody complex.
It was in 2004 that the Reserve Bank of India (RBI) announced the Liberalized Remittance Scheme to facilitate the Indian Residents to transfer funds abroad, up to USD 1, 25, 000, without its prior permission. The transfer could be used to acquire shares or debt instruments in listed or unlisted companies, or any other assets. The dollars could also be used to open, maintain and hold foreign currency accounts with banks outside India for carrying out any permitted transactions.
The monetary limit was increased in phases to $200,000 by September 2007, but was reduced to $75,000 in August 2013 to arrest a sharp slide in rupee. The LRS limit was subsequently increased again in phases and now stands at $250,000 a year. This means, an Indian resident individual can invest $250,000 abroad in buying shares or property or gift or donate to anyone living abroad up to this limit every year.
These frequent changes in laws have simply been serving the gluttonous Indians because their lawyers can find loopholes. It has been charged that many accused established offshore entities through the Panama law firm-floated enterprises at a time when it was against the law.
A few smart cheetahs have taken a technically convenient view that companies acquired is not the same as companies incorporated. Some have bunched their annual quota of remittances to subscribe to shares in an offshore entity acquired at an earlier date. Still, some others have received income earned abroad and deposited it in the entity to avoid tax.
These are views expressed by experts. The judgment will come once the investigations are complete.
But I am wondering. In Panama and at other tax havens, individuals can ask for bearer shares, where the owner’s name is not mentioned anywhere. Besides, it costs little or nothing to set up an entity abroad. The Registered Agent charges a few hundred dollars to incorporate an entity. It doesn’t take much time to incorporate one either. Companies are available off-the-shelf and can be registered in a couple of days.
The millions of documents, leaked from the Panamanian law firm Mossack Fonseca, have caused public outrage over how the world’s rich and powerful are able to stash their wealth and avoid taxes while many people suffer austerity and hardship.
Money-laundering has become a disease, much more lethal than drug dealing or contract killing. We know how deeply Indians are involved in black money transactions. The Modi Government is trying to get some of it back to boost economy. Although for long, very little has been done towards this goal.
‘The Panama papers’ should serve as a reminder. Iceland’s Prime Minister Sigmundur David Gunnlaugsson resigned on Tuesday, becoming the first casualty of leaked documents. Of course, we can’t accept the same level of standards from our Indian counterparts. So let’s wait for the investigations to reveal the truth.