Black Money Current Affairs - 2019

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India gets first tranche of Swiss account details

Under the new Automatic Information Exchange pact, India received its first tranche of Swiss Bank Account details. India hence is legally one among 75 countries with which the Switzerland Federal Tax Administration (SFTA) has exchanged information. The next exchange of information will take place in September 2020. This is because according to international agreement, the information exchange has to happen within nine months after the end of the calendar year. By which the next information exchange will take place by September 2020.

The SFTA said that it collected information from around 7,500 institutions. It has the largest exchange program with Germany of all other countries.

Automatic Information Exchange Pact

The pact was a major milestone in Indian Government’s fight against black money. The pact came into existence in 2017. The Swiss banks through the pact agreed to exchange information with countries abroad. The objective of the pact is to make tax evasion possible. The member countries OECD, G20 and other important financial centers were committed to implement the pact.

Working

According to the pact, the Swiss bank shares the information of the accounts to the domestic tax officials. They then share the information to the pact’s partner country.

Significance of the pact

The data received will help India establishing strong prosecuting cases against those who have unaccounted wealth. There are minimum of 100 cases that were closed before 2018 for which Swiss will now share details with India.

Concerns

It is believed that many Indians have closed their accounts after Swiss Government adopted the law due to international pressure. The details that are to be collected from Swiss Government includes mostly of business men who have now settled in South – East Asian, African, UK and other South American countries.

Election Commission of India on Electoral Bonds

In an affidavit filed before the Supreme Court, the Election Commission of India has made the following observations:

  • Electoral bonds, contrary to government claims, wreck transparency in political funding.
  • Electoral bonds coupled with the removal of the cap on foreign funding invites foreign corporate powers to impact Indian politics.
  • Electoral bonds would cause a “serious impact” on transparency in the funding of political parties.

The Election Commission of India further criticises amendments made to various key statutes through the two consecutive Finance Acts of 2016 and 2017.

What were the amendments made?

The Finance Act of 2017 amends various laws, including the Representation of the People Act of 1951, the Income Tax Act and the Companies Act. The Finance Act of 2016 makes changes in the Foreign Contribution (Regulation) Act of 2010.

The amendment to Representation of the People Act allows political parties to skip recording donations received by them through electoral bonds in their contribution reports to the ECI.

The amendments introduced to the Income Tax Act allow anonymous donations. Donors to political parties are not required to provide their names, address or PAN if they have contributed less than Rs. 20,000. The Election Commission notes that many political parties have been reporting a major portion of the donations received as being less than the prescribed limit of Rs. 20,000.

The Finance Act of 2016 allowed donations to be received from foreign companies having a majority stake in Indian companies.

Observations by Election Commission

The Election Commission of India called these measures as a retrograde step and the ECI has no way to ascertain whether the donations were received illegally by the political party from government companies or foreign sources.

The Election commission also expressed concerns that these amendments would pump in black money for political funding through shell companies and allow unchecked foreign funding of political parties in India which could lead to Indian politics being influenced by foreign companies.