S Murlidharan

Govt depts must work together

S. MURLIDHARAN | Updated on November 15, 2017 Published on January 15, 2012


The various arms of the government cannot be compartmentalised, as the result would be frustration of investigation, much to the delight of the fraudsters.

The Enforcement Directorate (ED), set up under the Foreign Exchange Management Act, 1999, is reportedly stymied and frustrated by another instrumentality of the central government, the Central Board of Direct Taxes (CBDT), set up under the Income-tax Act, 1961, in its successful prosecution of Indians who have reportedly stashed away money with LGT bank in Liechtenstein, and whose names were revealed to India a couple of years ago by the German government, under the Double Taxation Avoidance Agreement (DTAA) between the two countries.


In a country, which is admittedly a union of states with a federal bias, centre-state discords aren't uncommon, so much so the GST (Goods and Services Tax) to be taken up across the nation is still hanging fire, despite several rounds of discussions, with several sticky points remaining to be sorted out, that would convince the states that neither its revenue nor its power is being compromised. But this time around, it is the laughable right arm-left arm syndrome that is once again in full play.

It cannot be anybody's case that what is transmitted or revealed to one arm of the central government shouldn't be revealed to the other arms of that government. And if there is anything even remote to that effect in our DTAAs and tax information exchange schemes, then it reeks of poor drafting more than anything else. Even the CBI finds itself out of depths when the trail takes the investigators abroad and it has to take the help of the Enforcement Directorate, the specialists in foreign exchange-related misdemeanours and crimes.

In other words, the various arms of the government cannot be compartmentalised or pigeon-holed. Indeed, if they are so done, the result would be frustration of investigation on both the counts — tax frauds and foreign exchange regulation violations — much to the delight of the fraudsters.


The intractable and gargantuan problem of black money can be dealt with by India, not by using the insular approach various departments tend to adopt with a view to be one up, but through coordinated actions. The fountainhead of black money generation in this country, as indeed elsewhere, is through excise evasion that is done by suppressing actual production, and thereby removing the goods illegally without payment of excise duty, which sets off a chain motion — sales tax evasion followed by income tax evasions, with consummate and comprehensive ease. The income tax department might have a new set of teeth to flaunt — directorate of criminal investigation — but that doesn't mean it should become insular and fight shy of sharing valuable information with its cousin, the enforcement directorate (ED). And if it is genuinely hamstrung by the straightjacket of the DTAA, it should learn a valuable lesson from the episode — never enter into an agreement that denies you the much-needed elbow room for coordination and cooperation. No sensible government anywhere on earth can be heard saying that the information we exchange should be used exclusively for collecting taxes and taxes alone, given the fact that tax evasion is the culmination and subset of an involved and greater crime. The fight against black money cannot be successfully made single-handedly by one department. Embassies and High Commissions abroad must have economic intelligence units with their ears firmly to the ground, to help the investigators and administrators at home.

Published on January 15, 2012
This article is closed for comments.
Please Email the Editor