A central point of prime minister Modi’s campaign during general elections was fight against corruption. A related focus area was his commitment to bring back the black money stashed abroad by concerned Indians.
With the new government in office for over four-and-a-half months, opposition parties with Congress in the front have started castigating it for its alleged failure to bring back even a single rupee. This is totally unwarranted and un-called for.
Modi does not have a magic wand to deliver within such a short period and that too in an area where previous dispensations failed for decades. He needs to be tested on the basis of his actions rather than outcomes which naturally take time.
Thus, within a week of assuming office, the government complied with Supreme Court (SC) directive to set up a special investigation team (SIT). This is in contrast to erstwhile UPA dispensation dodging SC orders for 3 years on one pretext or the other.
The starting point of efforts in this endeavor is to get information from foreign banks where Indians have kept their illegal wealth. The Double Tax Avoidance Convention (DTAC) with Switzerland – a tax heaven jurisdiction – was amended in 2011 to facilitate flow of information.
Yet, thanks to virtual paralysis in governance under previous regime (or lack of political will), little effort was made to pursue the matter with Swiss authorities. On the other hand, the present government is acting with alacrity and meetings are planned between officials of two countries in next couple of weeks.
Concurrently, government has been using international platform to put pressure on Swiss government. In the meeting of G-20 finance ministers and central bank governors in Cairns (Australia), India played a proactive role in enabling approval of mechanisms for cooperation in regard to exchange of such information.
The efforts have yielded results. Switzerland has started the process of putting in place a mechanism for automatic exchange of tax information with foreign jurisdictions. Thus, on October 8, 2014 Swiss Federal Council (SFC) adopted definitive negotiation mandates for introducing the new global standard for automatic exchange of information (AEOI).
India may have to wait for a while as in the initial phase, it will focus only on European Union and USA. These are countries with which Switzerland has close economic and political ties and are considered important and promising in terms of their market potential for latter’s financial industry.
The new standard provides for exchange of information on bank account balances, interests, dividends and other financial income and sale proceeds to compute possible capital gains. It also enables access to data on beneficial owners of trusts and other financial constructs.
It is a big step forward in lifting the veil of secrecy that has so far been used as a shield by tax evaders. However, Modi government will have to make extra efforts to get information for the past period. This is because of reluctance of developed countries to let sharing happen on ‘retrospective’ basis.
In a worst case scenario, tax heaven jurisdictions might frustrate our efforts for timely digging out past cases to get back the money already lying in their banks. Yet, putting in place mechanisms for automatic sharing in future thereby deterring such illegal cross-border flows by itself will be a great accomplishment.
Turning to the domestic turf, Modi has taken several steps to nip the problem of black money in the bud. Thus, he has got cracking to plug every possible loop hole in the existing administrative set up that causes corruption leading to generation of black money.
The most effective fireball that he has built against corruption is a passionate call ‘na khaoonga, na khane doonga’ or ‘neither I take bribe nor let any one else’. This resonates in the entire political establishment & bureaucracy and deters them from indulging in corrupt practices.
To drive home his zero tolerance for corrupt practices, during his Independence Day address on August 15, 2014, prime minister used a cryptic phrase in Hindi viz., “Mera Kya, Mujhe Kya”. This means “what is there for me in this? Why should I be concerned?”
Modi used the phrase to describe mindset of a corrupt bureaucrat/official. Looking at a file, he will check what benefit will accrue to him? If it turns out, he has nothing to gain, he will simply look away! He pledged to root out this culture which delays approvals and decisions thereby stifling development.
Pursuant to this over-arching goal, he is making requisite changes in the governance structures and procedures to make decisions ‘policy- driven’ leaving minimal scope for discretion. All approvals and clearances relating to environment, forest, land et al have been put on electronic mode. The thrust is on making all transactions – relating to dispensation and delivery of all state services – paperless.
Major labour reforms are under way to turn ‘inspector raj’ in to history. Thus, labour inspectors will lose their powers to decide which units to visit. There will be only random inspections; list to be generated by computer. Complaint based inspection will happen only after examination of available evidence.
A ‘Shram Subidha’ or labor facilitation portal is being set up for ease of business and compliance with labor laws. The number of forms that employers have to file related to compliance will drop from 16 to 1. And this one consolidated return will be required to be filed on-line. All inspection reports have to be mandatorily uploaded on portal within 72 hours.
There is a more than 5 decade old law Apprenticeship Act (1961) which has a draconian provision to jail an employer for not implementing the Act. Modi has decided to drop this clause. Companies can add new trades under the Act without centre’s approval.
Norms for environment and forest approvals are being simplified to obviate the necessity of project promoter having to come to government/appraisal committee again. Approvals need not be hamstrung just because entire land has not been acquired initially at one go.
This government is emphasizing on ‘self-certification’ of documents to be submitted to the authorities and putting the onus for authenticity of information/facts on concerned person. This is a master stroke that will substantially improve ease of doing business and minimizing scope of corruption.
Modi is thus, progressively unclogging all ducts that breed corruption in government functioning. He is simplifying procedures and making processes transparent that will deflect industries and businesses away from this menace. These will demolish the very fountain head that generates black money. We will also get back money stashed in foreign banks though this may take a while as much depends on cooperation extended by latter and their host government.
In short, Modi’s tirade against corruption and black money is bound to meet with phenomenal success freeing up resources for development and people welfare.