The International Consortium of Investigative Journalists (ICIJ) has done service to the global community by exposing hundreds of individuals guilty of looting their own countries by sending money abroad illegally. The “Panama Papers” show how easy it is to create dummy entities in tax havens such as the Virgin Islands so as to park billions of euros anonymously. High-priced lawyers, financial advisers and bankers assist high-value individuals to cheat on taxes by generating cash through measures such as over-invoicing of imports, the difference in price going to offshore accounts. Much of this could easily be caught, had the authorities the will to do so. An example is Air India, the government-owned airline in India, which bought the same type of aircraft at the same period of time as two private sector competitors did, but paid much more for each than the other two airlines. However, it is unlikely that such discrepancies will ever get investigated.
Those who make billions out of looting the exchequer spend millions out of that in making friends with influential officials and politicians, with the result that they remain protected no matter which party comes to power. Instances are in the hundreds where items produced in India get sold at low prices to paper entities based in the Cayman Islands or such other tax havens, and within seconds get resold to others at much higher prices. The price differential remains in the foreign bank accounts of the domestic producer of the item sold in the first instance at an artificially low price to a dummy buyer but resold later to a genuine buyer at the correct market price. Were authorities serious in their task of dissevering illegal income, it would have been a simple matter to find out which items were being sold at prices far below that prevalent in the international market, but such an effort never gets made, because both officials as well as their political masters are more interested in adding to their personal bank accounts than to the exchequer.
In the Panama Papers, there are reported to be around five hundred Indian citizens. This is hardly a surprise, as for decades money has flowed out of the country through such means as under-invoicing, over-invoicing and hawala. The Government of India has followed past precedent and set up a Multi-Agency Investigative Team to “investigate and monitor” the revelations in the Panama papers. After months if not years, it will be seen that next to nothing will come of such “monitoring and investigation”. A few of the five hundred may be asked to pay a fine or penalty, but the rest will escape. India has a long tradition of those who are guilty of large-scale theft getting away, even while pickpockets making off with Rs 50 get sent to jail for years.
This columnist believes that the higher the scale of the robbery, the more should be the punishment. Petty theft ought to be punished by community service as a form of restitution, rather than by prison. The reality is that jail usually degrades an individual’s skills, making him or her lose the capacity to return to free life as a productive citizen. By depriving an individual of access to the internet or to the family, rehabilitation is being made almost impossible. Those guilty of petty offences or who are non-violent in behaviour need to be shifted to “open” jails, where they can be visited by family and friends and avoid the depression and psychosis that too often attaches to those sent to jail. It is a disgrace that seven decades after the British pulled down the Union Jack across the subcontinent, as yet the politicians who are their successors retain the harsh conditions of imprisonment that were prescribed by the former colonial masters of the subcontinent. Our officials and politicians have effortlessly slipped into the role of colonial masters, using the same restrictive laws and procedures that were followed by the British to ensure that the population was kept in a state of subservience.
It is the closer identification with the former colonial authority rather than with the ordinary people that is responsible for the successors of the British being more focussed on acquiring personal wealth than on improving the overall condition of the citizens. The level of commitment to the country and its people is low – indeed absent – in the countries of the subcontinent, so far as those in power and in positions of governmental authority are concerned. The consequence has been theft on the same scale – or in some instances worse – than that indulged in by the British colonial masters, and a neglect of policies that would improve living conditions. If a survey were to get done of the top hundred political leaders and the top five hundred civil servants, a large number would be seen to have their children abroad, and their families more often outside the country than inside. A son or a daughter gets sent abroad and made a foreign citizen, and subsequently money gets channelled in that individual’s name, so that many well-connected youths with no visible work living in Singapore or London or Miami nevertheless have very large incomes, usually funnelled through offshore banking havens. It would be a simple matter for authorities in India and Pakistan to investigative such individuals, given that we are only talking of the top five hundred officials in a country and the top hundred politicians, but of course, this will not even be attempted.
There is too much at stake for those at the top in a cosy system where making money and sending it abroad is regarded as normal. In order to make a pretense of ensuring acceptability, governments often impose heavy penalties on monies parked abroad, thereby making sure that few declarations get made. The only way to ensure access to such monies is to set low rates of penalty rather than high, and to ensure that those making such declarations not be subsequently harassed by officials. Otherwise, those voluntarily disclosing unaccounted assets will find themselves harassed every year for a long period thereafter, thereby reducing the incentive for others to follow their example. The Panama Papers represents only a very small proportion of the monies illegally parked abroad by individuals who care only about their own wealth rather than public welfare. Unless more of such money comes back and gets used within the country of origin, poverty in the subcontinent will continue to be shamefully high.
— The writer is Vice-Chair, Manipal Advanced Research Group, UNESCO Peace Chair & Professor of Geopolitics, Manipal University, Haryana State, India.