Govt’s silence on the Liechtenstein papers is deafening

Despite Germany’s offer to share secret data on the tax haven for free, there is no move to secure it yet

It is always interesting to notice the government’s silence when it ought to be active. It is more interesting to observe the silence of the media and financial experts when an earth-shaking event has taken place. The silence could be due to ignorance, or it could be silence of conspirators.

First the facts. Liechtenstein is a country as well as a convenient ‘letter box’ for moneyed people the world over to hide their ill-gotten wealth. It is so small a principality that you could jog across it into the next country.

Now, the crown prince of that country, with a difficult to pronounce — Alois von und Zu Liechtenstein (notice that the Prince’s surname is that of the country) — is angry with Germany for launching a massive tax-evasion investigation involving funds hidden away in his country’s vaults. Germany’s intelligence agency seems to have paid an unnamed informer more than $6 million for confidential and secret data about clients of LGT group, a bank owned by the prince’s family.

The revelations have led to the resignation of the head of Deutsche Post — the former German mail service — which is currently the world’s largest logistics company.

Lichtenstein leaders are furious and have focused their ire at the theft of data rather than on the facts of the case.

Interestingly, the Swiss are also furious about the method adopted by Berlin since they feel that a similar fate can befall their bank vaults where much of the world’s ill-gotten wealth is stored. The Swiss banking association was forced to apologise for remarks by its chairman that the activities of the German intelligence agency in a nationwide crackdown on tax evaders were reminiscent of Gestapo methods.

Of course, any mention of Hitler or his methods create significant unease in Berlin and the words chosen by the Swiss were totally inappropriate.

The German foreign intelligence agency, BND, seems to have got more than 700 clients of the LGT bank and German prosecutors are using this information to target hundreds of suspected tax evaders in the last few days.

LGT, on its part, claims that the ‘stolen data’ contains information about 1,400 clients and only 600 of them are Germans.

The German government has announced that it would share information on accounts held in the tax haven with any government that wants it. The spokesman for the German finance ministry, Thorstein Albig, has indicated that they would respond to such requests without charging any fees for the information. Finland, Sweden, and Norway have expressed interest in the data obtained by the Berlin intelligence agency.

Now, the interesting and intriguing part. The Indian government is totally silent on this issue and has not approached the German government for a look at that data, which is for free.

It is common knowledge that trillions of dollars of Indian money is in various tax havens like Antigua, Switzerland, Bahamas, Liechtenstein, Isle of Man, and St Kitts, etc. Throughout the Nehruvian socialistic period, under-invoicing of exports and over-invoicing of imports was very common.

Along with that, a substantial portion of external earnings was siphoned off to these tax havens. In a socialistic way, all leaders, be they from business, politics, films, sports or bureaucracy, participated in creating what we may call secular wealth, cutting across caste or creed distinctions. This lobby is well-entrenched and one of the main losers in the appreciation of the rupee.

Hence, they will try to keep the rupee artificially high. Also, there are reports that some of the FII money flowing into India is our own money kept abroad by the bandicoots that have got fattened by the Nehruvian bonanza of permit license quota raj.

I am confident that some serious leaders will bring it up in the Parliament to compel our government to initiate action for accessing this free data.

Also, it is required for the younger leaders of today in various fields to demand that adequate steps, both lawful and otherwise (like the Berlin intelligence agency) is taken to open up the closed vaults of many of these tax havens to get our money back. We are still not a banana republic.

We owe ourselves and the future generations this clean-up. The amount, according to my back-of-the-envelope calculations, can be at least ten times our current GDP, which will be in several trillion dollars and can be used to write off the loans of all marginal farmers of the world. This is the real sovereign wealth of our country belonging to billions of poor and weak people.

It may be of interest to some that the Prince of Lichtenstein has used the proceeds from banking to diversify into other areas and in 1997, Rice Tec, a small Texas rice grower owned by the Liechtenstein royal family, won a US patent for breeding a new strain of US-grown basmati rice that it believes is superior to many other varieties.

The Indian government described the granting of Rice Tec’s patent as “a classic case of economic hijack” and argued that it was “like saying that Scotch whisky can be made in India.” That is an interesting link to the kingdom.

The writer is Professor of Finance & Control, IIM Bangalore.
Views are personal.