Secret Bank Accounts

In most recent times I first heard Joseph Stiglitz, currently Chairman, UN Task Force on Global Financial Crisis (set up in November 2008 by President, UN General Assembly) raise the issue of secret back accounts in the presence of Somnath Chatterjee, Speaker, Lok Sabha at Mavlankar Hall, New Delhi while delivering Tenth D T Lakdawala Memorial Lecture titled "Crises Today and the Future of Capitalism" and free market fundamentalism on December 20, 2008. Stiglitz said: “Self-regulation is an oxymoron. Banks said they knew how to manage risk and needed no regulation. What they knew was how to create risk. There is so much of blame to go around that they can all lay claim to it.”

What was stated by Stiglitz was articulated in the backdrop of the the global financial crisis and certain European actions. In March, 2008, the 27 Finance Ministers of the European Union (EU) displayed renewed determination to crack down on tax havens that trade in secrecy and facilitate tax dodging at the expense of honest taxpayers around the world. The Ministers discussed measures to strengthen information exchange, limit secrecy, and increase pressure on countries like Liechtenstein, Switzerland, and Singapore that too often help tax dodgers avoid paying their fair share.

Compelling members of US Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs to say, "We applaud the EU's leadership, and call on the United States to strongly support the EU tax haven effort, and begin work with other international groups like the G-8 to combat offshore tax abuses. The U.S. Congress should also advance the worldwide clampdown on tax havens by enacting the Stop Tax Haven Abuse Act. "Each year, in the United States alone, offshore tax evasion produces an estimated $100 billion in unpaid taxes that could help pay for health care, education, and more. It's time to put an end to offshore tax dodging that robs the U.S. Treasury of needed funds. "

Earlier, Stiglitz had called for an end to bank secrecy in November, 2006, at Columbia University, New York.

Stiglitz connected the issue to concerns about globalization he has addressed in several books. He said, “We are now facing in globalization a really interomesting challenge that we have global companies who are trying to shape legal structures that allow them safe havens in one way or another so that they can get the protections they want when they are operating in Ecuador and every other country but that they can when they misbehave retreat to the Caymans Islands, to other places and be relatively immune from prosecution.”

Elsewhere he has said, “It was so clear that the reason $500 billion is in the Cayman Islands is not because the Cayman Islands provides a better climate for banking than New York City. You might be able to grow better sugar cane in the Cayman Islands, but not -- why is it better for banks? There’s clearly only one reason why banking goes on in the Cayman Islands. It is because it is a place where people can avoid taxes, regulations of all kinds. The question is, ‘Why is it that we pass regulations to stop certain behavior but we clearly condone, allow for these tax havens to continue?’ When I say ‘allow it,’ it really is an active position.”

Caymans, 45,000 people, 600 banks, World’s fifth largest financial center

Now while the Bhartiya Janta Party (BJP) has released an interim report outlining action to bring back Indian wealth hoarded in secret Swiss bank accounts and other tax havens if BJP led National Democratic Alliance (NDA) forms the government after the elections, the Communist Party of India (Marxist)[CPI(M)] says, "The BJP led Government did nothing to review the tax avoidance treaty (Double Taxation Avoidance Agreement) with Mauritius during its tenure despite repeated demands by the CPI (M)." The Polit Bureau of the CPI(M) has issued a statement BJP’s Swiss Accounts Task Force Report: A Self Goal

Even prior to the release of the Swiss Accounts Task Force Report, Sucheta Dalal, a senior business journalist wrote on April 7, 2009 "it is a fact that Indian money in Swiss banks is staggeringly high and could range from $500 billion to $1,400 billion (Rs70,00,000 crore)." She added, Ever since the Reserve Bank of India allowed Indians to invest $200,000 abroad, these bankers could solicit business openly. Contrary to what has been said, people and politicians do not have to make a detour to Switzerland to open, withdraw or transfer money from their accounts.

A study by Washington based Global Financial Integrity: “The GFI study shows that during the period from 2002 to 2006, annually $27.3 billions were stashed away from India”. If this is true, then nearly $55 billion worth of illicit transfers occurred in the two year period, 2002 to 2004.(mediavigil)