Former Union Law Minister Ram Jethmalani petitioned India's Supreme Court, on 19 January 2011, to recover so-called "black money" – untaxed funds concealed by wealthy individuals – from European banks. Jethmalani is demanding that the government hand over relevant correspondence with the German authorities, with the Swiss bank UBS and with the Liechtenstein bank LGT.
But the Indian federal government has refused to cooperate and has withheld the suspects' names on grounds of privilege. It filed a court affidavit declining to divulge details of funds alleged by Jethmalani to have been deposited at LGT by 26 Indian individuals.
Jethmalani's counsel accused the government of "indulging in a cover-up operation". The Supreme Court bench also admonished the government for its refusal to reveal the names. It described the unlawful movement of funds offshore as "looting of national money".
India's prime minister, Manmohan Singh, replied that there was no instant solution to the problem and that his government was bound to secrecy by its treaty obligations with the German government. The Solicitor-General told the court that the Indian tax authority was already taking recovery action under the Double Taxation Avoidance Act.
A Swiss parliamentary committee has approved the tax information exchange agreement negotiated between India and Switzerland. The treaty now goes to the full Swiss parliament for approval.
India's Income Tax Department will soon open overseas units in eight countries to permit it to liaise more closely with local tax authorities and better coordinate the exchange of tax information under India's income tax treaties. The units will be established in Cyprus, France, Germany, Japan, the Netherlands, the United Arab Emirates, the UK and the US. The department opened overseas units in Mauritius and Singapore in May last year.
The overseas units will be headed by senior Income Tax Department officers, who will be designated as first secretaries at the Indian mission or embassy of the foreign country where the unit is located. Indian Finance Minister Pranab Mukherjee has asked the tax authorities to expedite the hiring process so that the new units can begin operating within two months, according to a 6 January report in The Economic Times.
Mukherjee also said, on 25 January, that the government has set up a panel to examine if an amnesty scheme should be unveiled to tackle black money. He detailed a five-pronged strategy that consisted of joining the global crusade against black money, creating a legislative framework, setting up institutions dealing with illicit funds, developing systems to implement and impart skills to manpower for effective action.
"Amnesty schemes have a double side. Sometimes when it is announced, it is highly criticized that it is at the cost of honest taxpayers, and sometimes, it helps to bring in some money. That's why I have appointed a group to look into it and to make suggestions and recommendations to me," said when asked if the government was considering an amnesty scheme,” said Mukherjee.
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