GS Mains Model Question & Answer: Discuss the relevance of
The Panama Papers Reveal to the black money debate in India
Q. Discuss the relevance of The Panama Papers Reveal
to the black money debate in India . (12.5 Marks)
(General Studies Mains Paper III- Economy : Indian Economy and issues
relating to planning)
Model Answer :
Panama Papers is a global investigation which revealed
secretive industry of offshore that the world’s rich and powerful people use to
hide their assets. Offshore company could be a corporation or (sometimes) other
type of legal entity which is incorporated or registered in an offshore
financial centre or “tax haven”. Panama Papers were leaked from the secret files
of Mossack Fonseca, a Panama based law firm. Notably, Panama is known tax haven.
Tax Haven : Tax haven is a country where, on a national
level, certain taxes are levied at a very low rate or not at all. These
countries also offer financial secrecy, which can be used by foreign individuals
to circumvent certain taxes (such as inheritance tax on money, and income tax of
the interest on the money you have on your bank account) and hide black money.
The leaked documents were accessed by Munich-based newspaper
Suddeutsche Zeitung which a year ago collaborated with the International
Consortium of Investigative Journalists (ICIJ).The Panama Papers project was
investigated by 375 journalists in 76 countries.
The investigation leaked over 11 million confidential documents and exposed
powerful and rich people who use offshore companies to facilitate bribery, arms
deals, tax evasion, financial fraud and drug trafficking.
The Panama Papers list features high profile international
politicians like Russian President Vladimir Putin, Pakistan Prime Minister Nawaz
Sharif, Rami and Hafez Makhlouf (cousins of Syrian dictator Bashar al-Assad),
Ian Cameron (Father of David Cameron) and King of Saudi Arabia.
Over 500 Indians were also named in the Panama Papers list,
which includes Bollywood actors, industrialists and, at least two politicians.
The list includes bollywood actors like Amitabh Bachchan, Aishwarya Rai Bachchan,
DLF’s K P Singh along with nine other members of his family, Gautam Adani’s
elder brother Vinod Adani to Indiabulls promoter Sameer Gehlaut and Apollo Tyres
promoter, according to the report. The report also names two politicians —
Shishir Bajoria from West Bengal and Anurag Kejrival, the former chief of the
Delhi Loksatta Party.
The Panama Papers revealed how these powerful and rich men and women hid
billions of dollars in assets through offshore companies in tax havens like
What Do The Panama Papers Reveal
The documents show the myriad ways in which the rich can exploit secretive
offshore tax regimes. It reveals about :
- Individuals who have set up offshore entities through the Panama law
firm. Some of the Indians floated offshore entities at a time when laws did
not allow them to do so.
- Individuals who have received income earned abroad and deposited it in
the entity to avoid tax.
- Individuals who have opened a bank account to keep payoffs in government
contracts, or held “proceeds of crime” or property bought with money made
illegally in Trusts/ Foundations.
Impact of Panama Papers Leakage to the black money debate in India
The Narendra Modi-government is under tremendous pressure to win back black
money from abroad to fulfill its poll promises in the run up to the 2014 Lok
The important question that the Panama list brings to the
question is this: Can the Modi-government initiate meaningful action against the
offenders by investigating their foreign holdings and, thus, show its
seriousness on the black money hunt?
It is important to note that the Panama list also shows the
apparent failure of the the 90-days black money window offered last year to draw
foreign blackmoney holders. The fate of the 90-day black money scheme was not
too hard to anticipate since no one with ill-gotten wealth or unaccounted wealth
would want to sacrifice 60 percent of their money to comply with the government
regulations. They would find a way out by the time the arms of the law reach
their bank lockers in tax havens.
In India, political promise of action against black money is
not a convincing one since many of the political parties themselves thrive on
funding from the same black money holders. The lack of transparency and the
give-and-take relationship between politicians and corporations/wealthy
individuals makes it even more difficult to cleanse the system and undertake
action against the offenders.