Legitimacy of the wealth
Reserve Bank of India Governor Raghuram Rajan has again intervened in
the debate over the Panama Papers, saying it was important that
societies worked towards legitimizing wealth.
Pix : Indian Express
He has said that creating opportunities to sustain legitimacy of
wealth was a cause of concern not only for emerging economies but
industrial nations as well.
"Improving opportunities across the board is extremely important to
sustain legitimacy of wealth," Rajan said, while speaking at
Confederation of Indian Industry - Singapore Symposium 2016. "If whole
hoards of people don't feel they have the opportunity, then the focus is
going to be on those who have it. And that is something that we need to
worry about at the global level."
The Panama Papers are a leak of over 11 million files from the
database of Panamanian law firm Mossack Fonseca that helped clients
across the world set up offshore companies. The papers reveal details of
over 500 Indians with links to such offshore firms.
"One of the important sources of concern which you have seen with
some of these Panama reports and so on is building in to this notion of
the illegitimacy of wealth," Rajan added. "Earlier, the crisis built up
the idea that the bankers were illegitimate, that crony capitalism was
illegitimate all of which makes sense."
Rajan also expressed concern about the notion whether passive wealth
holdings were being considered illegitimate. "Increasingly this talk
about whether entrepreneurial wealth is illegitimate, whether self-made
people should have what they have and whether that is something that's
fair game," Rajan opined. "I think this is dangerous. And, the fact that
there are occasions when people are found to be hiding their wealth as
in the Panama allegations, essentially contributes to this process of
Commenting on the investigations in the Panama leak case, Rajan said,
enquiries would be conducted to determine whether any wrongdoing was
involved while adding that there could be genuine reasons for Indians
named in the Mossack Fonseca leaks to have offshore accounts.
"It is important to note that there are legitimate reasons also to
have accounts outside, the LRS (Liberalised Remittance Scheme) allows
you to take money out," Rajan said, after unveiling the monetary policy
last week. "We have to see what is legitimate and what is not
Under the remittance scheme, all resident individuals are allowed to
freely remit up to US$250,000 per financial year for any permissible
current or capital account transaction or a combination of both.
RBI is part of the multi-agency inquiry ordered by the government
into the holdings of Indians named in the Panama Papers. The group also
comprises officials from the Central Board of Direct Taxes (CBDT), its
foreign tax and tax research division and the Financial Intelligence
Unit (FIU), which will monitor the flow of information in these cases.
- Economic Times