Still many illegal funds elsewhere

The tiny state of Panama, a central American republic of just three million people, has long been known to the global shipping community for its famous 77-km long canal, a world wonder, and also as a US promoted rogue state registering ships, largely from the US, plying in the oceans and seas around the world under Panamanian flag, helping shipowners hide their income and profit and violate all kinds of maritime regulations, including those for seafarers.

It was a known tax haven for rogue shipping companies, real owners of which rarely surfaced. As a result, Panama has the world's largest shipping fleet -- more than the combined tonnage of the two largest global economies and trading nations, the US and China. For over 100 years, Panama has been one of the world's most important marine trade routes, which connects the Pacific and Atlantic oceans. Thanks to the USA, it always managed to maintain a low profile as a tax haven, until the international law firm with strong Panama connection, Mossack Fonseca, decided to leak 11 million “Panama Papers” exposing their business link with Panama as dump house of secret funds. Ironically, US businessmen, politicians, celebrities, financial traffickers, and the like rarely figured in Fonseca's eye-popping list.

The most interesting part of the Panama Papers leak is the mention of over 500 well-known Indians as stakeholders in obscure ventures in Panama. They include India's biggest real-estate baron, K.P. Singh of DLF, who is also a close associate of Robert Vadra, Vinod Adani, brother of businessman Gautam Adani, Apollo Tyre's Onkar Kanwar, TAFE's Mallika Srinivasan, prominent Goan shipping family member Anil Vasudev Salgaokar, former Solicitor General Harish Salve, former Attorney General Soli Sorabjee's physician son Jehangir and film stars Amitabh Bachchan and Aishwarya Rai Bachchan.

Though Amitabh Bachchan was quick to respond to the Panama leak saying he had nothing to do with any Panama company and his name may have been misused, not many have reacted to their names figuring in the first list of Panama Papers alongside such global figures and their associates and close friends as Saudi King, UAE President, Argentina President, Russian President, British Prime Minister, South Africa President, People's Republic of China's President, children of Pakistan Prime Minister Nawaz Sharif, son of former UN Secretary General Kofi Annan, Sportsmen Lionel Messi and Michel Platini.

Panama Papers are mostly unclear about the colour of the money parked in the accounts of individuals through their offshore firms. They could just be tax-evaded black money or tax-avoided grey funds. They could comprise money made out of under-invoicing or over-invoicing export-import trade by companies or individuals, hawala transferred money, legal or illegal trade facilitation commissions, terror fund transfers, or a purely legal off-shore investment. Illegal or legal money transfers in tax havens are not easy to detect. Tax havens, which survive and flourish on such money transfers, rarely cooperate with any outside government. They will try to protect any national tax offender who may be using the offshore hidden fund channels without offending local rules and regulations of host countries. India's Rajiv Gandhi-era Finance Minister Vishwanath Pratap Singh and his enforcement directorate head Bhure Lal tried their best to fruitlessly nab Ajitabh Bachchan, brother of Amitabh Bachchan, named in Panama Papers, on charges of illegal transfer of huge fund to Luxembourg and Switzerland, both leading tax havens, raised out of the sale of his huge stocks in a Mumbai-based pharmaceutical company. Ajitabh Bachchan moved to Luxembourg lock, stock and barrel overnight to relocate himself there and run a chemical factory across the border in Switzerland.

The life of the Indian super rich is much easier now than they were in the 1970s, 1980s, and 1990s. Most Indian billionaires today have legal residences in Europe, the USA, Singapore and other free countries across the world. Dual passport and dual citizenship facilities are offered by most tax havens. These offers are legally advertised in some of the well-known foreign publications that are sold in India as well as in other countries. The deals are made secretly through agents. It is not easy to book such people, who have taken legal shelters abroad after allegedly cheating the governments, banks and even the innocent public of their countries of origin.

Like Lalit Modi, Pramod Mittal, and Vijay Mallya, there are several other moneyed Indians who have happily left the country with family to peacefully park themselves in their big villas abroad which they legally acquired. They may be alleged tax offenders, bank looters or employees' provident fund cheaters in their countries of origin, but they are respectable citizens in host countries. Almost all of them have strong political and bureaucratic connections in their countries of origin as well as in host countries. Most Indian billionaires also have offshore shell companies and trading ventures aboard. Many of them have children based outside the country. Parking legal or illegal funds outside is child's play for them. Like a “nominee” in a “demat” share account India, it is no longer necessary to sign papers to be legal owners of such stocks in due course.

Incidentally, India, which is often mentioned as one of the major sources of global hidden funds, may also be accused of aiding hidden funds accumulation by  multinational corporations doing business with the country. For instance, most US MNCs having FDI in India routed their investments into the country through their legal subsidiaries or shell companies based in one or the other international tax haven. GE of the USA, the world's largest manufacturing company, has lately been accused by a Democratic Party nominee, Bernie Sanders, of parking huge funds in tax havens and demanded the GE chairman and CEO be arrested. Sanders has been constantly fighting against the dishonest US way of protecting and promoting hidden funds by its super-rich, large corporations and friendly overseas countries.

Until recently, Mauritius, a tax haven has been used by some 400 well-known large foreign financial institutions to park funds collected from unknown sources in Indian stock market. Many believe that many of these FIs are handling funds hidden by Indians and Indian corporations abroad. In fact, the US is officially the world's No. 1 tax haven. The latest Financial Secrecy Index says it is "because of both the size of its offshore sector, and also its rather wayward attitude to international cooperation and reform." America provides a wide array of secrecy and tax-free facilities for non-residents, both at a federal level and at the level of individual states.

India's national parties such as Congress and BJP are known to make huge noise about unearthing black money hidden abroad by Indians and their shell companies when they are out of power. But, they fail to achieve any noticeable success when in power. According to reports, an astonishing amount of global private financial wealth – ranging from $21 to $32 trillion as of 2010 – is parked in the world's black hole of secret tax havens, made up of 136 predominantly low to middle-income countries, but the top 10, including the US, Switzerland, Germany, Cayman Island, Hong Kong, Singapore, Luxembourg, Dubai, Bahrain, account for 61 percent of the overall such wealth. It is possible that Indians have secret funds parked in most of these countries.