Graft-ridden India opens campaign against "black money"

NEW DELHI Tue Jan 25, 2011 5:43pm IST

Sajja Murli Chaudhary, 45, an employee of telecom operator systems takes part in a silent protest against the telecom corruption scandal in New Delhi December 9, 2010. REUTERS/Parivartan Sharma/Files

Sajja Murli Chaudhary, 45, an employee of telecom operator systems takes part in a silent protest against the telecom corruption scandal in New Delhi December 9, 2010.

Credit: Reuters/Parivartan Sharma/Files

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NEW DELHI (Reuters) - India on Tuesday announced a slew of measures, including stronger disclosure pacts with foreign countries, to curb tax crimes potentially worth about $1 trillion in the latest move by a government trying to boost its image.

But Finance Minister Pranab Mukherjee's five-point strategy was unlikely to pacify the opposition which has mounted a frontal attack on a government dogged by multi-billion dollar corruption scams and a growing feeling it has failed to curb graft.

Mukherjee's call to arms is not the first time government officials have tried to clamp down on corruption. But little has emerged from those investigations and convictions of high officials or politicians for graft remain negligible.

What has turned out to be a lightning rod for political protests now is a potential $39 billion fraud in awarding of telecoms licences in 2008, a row that has caused a political deadlock in the country with the opposition refusing to allow the December parliament session to function.

Mukherjee told a press conference that the steps would help track and repatriate illicit funds or "black money" stashed away abroad, a move many see as a public relations measure to boost government image ahead of key state elections over the next year.

While the government stands accused of tolerating corruption, the country's Supreme Court has chatised Singh's coalition for failing to unearth illicit funds kept in Swiss banks and other tax havens. Singh has had to also defend himself in court against allegations of inaction in the telecoms case.

Among the measures announced by Mukherjee was modifying double taxation avoidance pacts with as many as 74 countries to "broaden the scope" of exchange of information, including those related to banking.

Eight Indian tax units were being set up abroad and staff at foreign tax division boosted. He also announced a panel to look into the possibility of granting amnesty to offenders who pay up.

"So far there are no reliable estimates of black money both inside and outside the country," Mukherjee said, adding an interim task force in 2009 found illicit funds to range between $500 billion and what is now the size of India's economy of $1.4 trillion.

He said the authorities had discovered cases of tax evasion on $3.3 billion in the last 18 months and stronger enforcement had resulted in higher tax receipts.

Singh is already under pressure from an opposition demand for a joint parliamentary probe into a $39 billion telecoms scam, leading to the sacking of Telecoms Minister Andimuthu Raja.

The scandal has deadlocked politics in Asia's third-largest economy, and the main opposition Bharatiya Janata Party (BJP) has said it could block the February session of parliament as well, in which the budget is due to be debated, if the joint parliamentary committee does not investigate the case.

BJP rejected Mukherjee's prescription to fight graft.

"It shows the government is reluctant to show any meaningful effort ... because if the names are (out in the) open, this government may have some problems," BJP spokesman Ravi Shankar

Prasad told reporters.

Corruption may cost India between 1-2 percent of its GDP each year.

India is the world's ninth most corrupt country, with 54 percent of the population paying a bribe in the last 12 months, according to a report by Transparency International.

(Editing by Alistair Scrutton)

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