The Real problems that tax evasion and resource loot present in our world: A short Reflection on the leak from the Panamanian law firm, Mossack Fonseca. (by Shiva Kant Jha, Advocate )

  O’M

The  prime reasons for the  loot of resources, and corrupt practices were insightfully  noticed by the  two Presidents of the USA: one in 1861, by President Abraham Lincoln on noticing the imperious ascent in corporate power, and the other in 2016, by President Obama in his perceptive localisation of the problem posed by the Panama Papers Leak.  These two comments deserve a close reflection to comprehend the realities of our day to forge appropriate remedies for the weal of people,  and  for genuine democracy.

Shortly before his death, President Abraham Lincoln (1809-1865), the 16th President of the United States, expressed, on 21st November 1864, his apprehension about the future of his Republic:

“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. . . . Corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavour to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed.”

And on April 5, 2016, responding to the premonitions of scandals emerging  through the Panama Papers Leak, President Obama made a comment with utmost candour.  He said:

”In the news over the last couple of days, we’ve had another reminder in this big dump of data coming out of Panama that tax avoidance is a big, global problem.  It’s not unique to other countries because, frankly, there are folks here in America who are taking advantage of the same stuff.  A lot of it is legal, but that’s exactly the problem.  It’s not that they’re breaking the laws, it’s that the laws are so poorly designed that they allow people, if they’ve got enough lawyers and enough accountants, to wiggle out of responsibilities that ordinary citizens are having to abide by”.

(ii)

After having argued the Indo-Mauritius Tax Treaty Abuse Case in the early years of the first decade of this century [ Shiva Kant Jha v. Union of India, and the Union of India v. Azadi Bachao Andolan], I  had a sense of catharsis in writing my  book entitled   Judicial Role in Globalised Economy, esp Chapter 2.   While drawing up the portrait of our time in Chapter 29 of  the second edition of my memoir On the Loom of Time,   I  had noticed President Abraham Lincoln’s said comment, and developed it with reference to the ideas of  Noam Chomsky.  As both the  books are  out-of-print,  I  have put their texts   on my website, http://www.shivakantjha.org.  I advise my readers to read these two chapters to  appreciate the profundity of the above-quoted comments by the two U.S. Presidents.

                   The climate that has been created/crafted by the dominant key-international players over the years of neoliberal economy in the post-World War II phase, has helped substantially in the creation/ modification/ interpretation of law for the benefit of the high net-worth individuals and the MNCs. A complex web has been created spanning through the dense contrived darkness over secret jurisdictions and tax havens to conceal the exact nature of economic and fiscal transactions through the extension of corporate structures with several rungs erected on the quick-sound over various parts of our terra firma, now even in the cyberspace. They have creatively utilised the concepts of sovereignty, incorporation, and residency through the newly evolved states-system about which I have already written about this  in Chapter 26 of my On the Loom of Time.  Though the Delhi High Court’s decision  in Shiva Kant Jha & Anr.  v. Union of India & Anr.  [ (2002) 256 ITR 563 (Del) was reversed by our Supreme Court in Union of India vs. Azadi Bachao Andolan & Anr.,  its peremptory dictum has survived over all the years thereafter as none can quarrel with  its sagacity and democratic propriety: The High Court had said: “ No law encourages opaque system to prevail.”. On legal sophistry the Union of India helped the tax haven operators, but its moral shock has been felt over all the years thereafter.  Even our Government has been often  Janus-faced: telling us that remedial measures would be taken to stop the evil that flourishes through secret jurisdictions and tax havens. But neither that circular,  that had patronised the tax haven secrecy by bidding our authorities to go under blinkers,  has been withdrawn, nor the Indo-Mauritius DTAA has been reviewed to ensure that shell companies are not floated to facilitate transmission of black money under the shroud that the tax havens and secrecy jurisdictions provide, nor effective deterrence has been created against transmission through the dark corridors of the international financial architecture.

 

.   But the worst happened when the most sinister sort of corporate structuring was approved by our Supreme Court in Vodafone Case.  It illustrates how the Rogue Finance and their corporate vehicles resort to the creation of the labyrinthine corporate structures to operate through fog and mist hopping from jurisdiction to jurisdiction on this planet.   I was amazed  why none felt aghast when the authority of  Pope Innocent III and IV  was cited in the  support of such corporate re-structuring. .  Those ideas had been advanced by them with the obvious purpose to promote the imperium of the Roman Catholic Church   before the rise of nation states, and emergence of democracy.  The MNCs, and their experts, consider ‘corporations’ virtually mystical and magical structures, which can be erected on the waves, in the thin air, in the ethereal space choosing their span of life, and the points of their birth, and also of their death.  The corporate lawyers of our time  plead  for ‘corporations’ and ‘corporate imperium’ drawing  their light from the ideas in Mystci Corporis, (translated into English as ‘The Mystical Body’) on which Pope Innocent had founded his view. The Church was the mystical body of Christ in the City of God; and the ‘corporation’ became a foil to the R.C. Church in the City of  Man, this world of ours!

(iii)

Whenever I read Charles Mackey’s   Extraordinary Popular Delusions and Madness (1841),  the sagacious comments of Galbraith in his The Age of Uncertainty (1997) comes to mind:

“The man who is admired for the ingenuity of his larceny is almost always rediscovering some earlier form of fraud. The basic forms are all known, have all been practiced.  The  manners  of capitalism improve. The morals may not.”

President Obama’s comment reminds me of what I had written, more than a decade back, in  my Judicial Role in Globalised Economy. I had expressed my concern on the measure of collusion shown by the experts of high technology, law, and accounts and a band of PEPs  (“PEPs are individuals who are or have in the past entrusted prominent public functions in a particular country.”).

It is worth noting that President Lincoln (1809 – 1865), the 16th President of the United States America, was himself an eminent lawyer in Illinois, and Barak Obama, the present  President  of the United States is the 44th President of the  United States  had   served as  the president of the Harvard Law Review, had lectured on constitutional law at the  University of Chicago Law School, and had a wide experience of being a distinguished attorney.  Even at the cost of being censured by readers for my descent from the sublime to the ridiculous, this humble self feels like submitting that he too is an advocate, an active member of the Indian Bar. When I  had written in my Judicial Role, or when I was reflecting on the quotes of Lincoln and Obama, I  had worrisome moments: Are we not forfeiting our claim to be considered the members of learned profession?  ‘’Learned Profession’’ is a term of art that refers to  one of the three professions believed to be learned and committed to salutary high principles: these are medicine, law and divinity. The real cause of the degradation in any profession is the loss of its moorings in ethical values. We live to see all around us an  “exponential growth of technology going with stagnant morality”.

(iv)

The rottenness of the state of our affairs is illustrated by the Panama leak papers which bring to light the rotten state of the global economy with lurid details in which the professionals  have facilitated the hyper creativity in pursuit of greed.  Scanning the global scenario of the corporate structuring through the labyrinth of the  dark nodes (manifest in the increasing number of the tiny-tot states), I agreed with  Prof Sol Picciotto  that after the World War II numerous tiny states were created under the protective umbrella of the USA and UK to help neoliberal economy beget capitalism by providing safe place to grow, and ward off security hazards by providing not only much-needed darkness but also by helping evolve legal system creatively which facilitates and protects such endeavours. Prof. Picciotto has aptly said

“The emergence of ‘offshore’ statehood acted as a catalyst for the undermining of the classic liberal international system, which was reinstated within a framework of multilateral institutions after 1945. ‘Offshore’ statehood was created by international investors (especially TNCs) and their advisers, responding to and exploiting the elastic scope of state sovereignty based on regulatory jurisdiction and legal fictions of residence and incorporation.”

(v)

Abraham Lincoln had insightfully noticed the triple alliance of  MNCs, capitalism, and corruption. The story of the West, after the World War II is, in effect, to facilitate the triple alliance to rule the world, a phenomenon that threatens the world with corporate hegemony, decline of democratic values, and the dominance of the greedy-property-owners, and subjugation of the nation states. There are many ways to bring about such a change, but the most conspicuous effort is by ensuring that law itself turns facilitators in such pursuits. After having established secret jurisdictions across the world, they  created  the dense veneer of secrecy to conceal their art and craft by the creative use of  such widely known  concepts as  sovereignty, incorporation, and residency. Various changes have been made  through ingenuous creativity to facilitate the neoliberal agenda of our times, esp.  after 2003 when the Liberalised Remittance Scheme (LRS) was introduced facilitating  sending funds abroad for a variety of reasons without breaking law.  It was my reflection on this syndrome that had led me to suggest to the Supreme Court-appointed SIT to  undertake a review of the laws to ensure that the laws do not become the ignoble helper of the crooks whose theatre of operations is not only this tiny earth but the entire cyberspace. One of my suggestions to the SIT was thus stated at page 557 of On the Loom of Time:

“ All the statutory provisions in various Acts introduced in the recent years should be reviewed. Most of the provisions, through studied omissions and commissions, have been devised to make things easier for the looters and crooks. From 1990s various legal provisions have been altered to adapt to the demands of the neoliberal agenda. We all know how many laws were altered because of the WTO commitments. The Foreign Exchange Regulation Act was replaced by the Foreign Exchange Management Act after subjecting it to changes to make it compliant with the neoliberal policy of the WTO-IMF-World Bank. It was the same strategy that was afoot crafting the provisions of the Prevention of Money Laundering Act 2002. All the laws deserve to be considered to see if by omissions and commissions, through their tilts and tenor, they favour, or facilitate, the evil of black money, and its concealed movements within and outside India. I understand that the SIT is already on this track.”

 

More important was my suggestion to the SIT on the protocol of its work. I wrote, to quote from page 477 of On the Loom of Time:

“ It is great that our Hon’ble Supreme Court has given very sound and comprehensive mandate to the SIT it has appointed. …. In effect, the instructions to the SIT require this body to explore all the investigative possibilities to the ultimate confines drawing on the latest developments in  the information technology. I think this would require the study of the “computer program”  which is used by the crooks to transform money into abstractions, and used by the professional service providers  to transmit money from realms to realms both on the earth and in the virtual space. It is time when it is essential to constitute a core segment  of investigators   in investigative  structure who can develop software to keep track  of money leapfrogging from jurisdictions to jurisdictions, from the earth to cyberspace…..Our investigators would endeavour to acquire skill to use the innovative computer  information technology  that  even helps  the crooks to backdate  transactions  to any point of time , past or future. An investigator, like a lawyer or a poet, must possess that imaginative faculty to see the gone past and the looming future by observing the present as it unfolds itself before his mind’s eye.”

(vi)

Abraham Lincoln had insightfully noticed the triple alliance of  MNCs, capitalism, and corruption. The story of the West, after the World War II is, in effect, to facilitate the triple alliance to rule the world, a phenomenon that threatens the world with corporate hegemony, decline of democratic values, and the dominance of the greedy-property-owners, and subjugation of the nation states. There are many ways to bring about such a change, but the most conspicuous effort is by ensuring that law itself turns facilitators in such pursuits. After having established secret jurisdictions across the world, they  created  the dense veneer of secrecy to conceal their art and craft by the creative use of  such widely known  concepts as  sovereignty, incorporation, and residency. Various changes have been made  through ingenuous creativity to facilitate the neoliberal agenda of our times. It was my reflection on this syndrome that had led me to suggest to the Supreme Court-appointed SIT to  undertake a review of the laws to ensure that the laws do not become the ignoble helper of the crooks whose theatre of operations is not only this tiny earth but the entire cyberspace.

(vii)

It is the time for all of us to realise that we all  are before the bar of history.  We should, both at our national level and at global level, try to build systems under which  laws cannot be abused. We know laws help us to  judge what is proper, but moments do come when we must judge our law,  and also our  system of law administration. The Panama Paper Leak is a timely warning before more sinister leaks occur. If we in India are well equipped to hold things under vigilance, we shall be more effective to look after our interest if, perish the thought, similar leak takes place from  the Ugland House in the Cayman Islands, or from the Cathedral Square in Mauritius. As things seem to suggest,  in our market-ruled globalised economy with  fast changing technology  but stagnant morality,  prudence demands us to remain vigilant overseeing all our institutions.  It is high time to realise the wisdom of President Abraham Lincoln.  Who knows? We  may  have in store many more leaks,  no less sinister than that from the Panamanian law firm  Mossack Fonseca.

 

Email ID – shivakantjha@gmail.com

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