Senior counsel Harish Salve, whose name appeared in the so-called Panama Papers leak of more than 11 million financial documents from Panama-based law firm Mossack Fonseca, published in India by the Indian Express, told Legally India that including his name was unfair, since his use of a British Virgin Islands-based (BVI) shell company was legal and transparently declared in his tax returns.
He had told the Express in a statement that all three BVI companies he had been involved with had zero revenues and were inactive.
When contacted for further comment, he told Legally India today: “That (Indian Express) reply was sent from Paris. After coming back to India, I have checked and all my investments are appropriately disclosed in my tax return of 2013 - they (IE) had asked me for 2012. (The) March 2013 returns were obliged to carry disclosures, and my returns had all the assets and investments disclosed. Assessments are complete.”
He said that he had never had any bank account in the BVI, but only set up a company there when he wanted to invest in the UK.
“I was advised that making investment in and from UK, may render me a tax resident in UK, so I set up a company in BVI in 2012,” he said, intending to move his portfolio there from the UK. But since 2014, as I became a tax resident of the UK, I abandoned the idea.”
Salve had joined London’s elite Blackstone Chambers of barristers in 2013, often working from the UK on arbitrations during India’s court vacations, and said he’s since then paid taxes in both the UK and in India.
Salve reiterated, however, that all foreign bank accounts, as well as “shares that were to be transferred to the BVI company” were mentioned in his financial returns.
“Unfortunately this kind of reporting, Jehangir Sorabjee and I have said: Look everything we have is declared. If it is declared, is it not the invasion of my privacy to publish all this?” Salve asked.
Jehangir Sorabjee, a professor of medicine and son of ex-attorney general Soli Sorabjee, was also named in the Indian Express story as having had an offshore company, which Sorabjee had told the Express was set up in accordance with Reserve Bank of India (RBI) norms and was fully declared on his returns.
In respect of another BVI company mentioned in the Express story, called Edenoval Ltd that was set up by a friend in which Salve indirectly held a stake, Salve said that this was never active. “Somebody was giving us a good investment in a mining asset outside the UK. So I said ok, we make some money for the children. (But) nothing came out of it, it is just sitting there. Nothing invested. Nothing done.”
“See, now they (Express) have not told you candidly that they have not been able to find any assets (in that company) – they just found a company being floated (in the BVI).”
“It is unfair, to be completely honest, it hurts,” added Salve. “Ultimately I am a private person (…) If they (the Revenue) ask me, I can say, go check my return.
“My reputation in the profession, you can ask anybody, (is that) it is very difficult to brief him because he doesn’t take money in cash. I am one of the few, if somebody insists on cash, I put it in a bank. I say, look if the IT (Income Tax department) asks you, you have to explain. And I’m treated like this.”
“I mean, we people (lawyers) are tax payers. On the one hand you say that Indian lawyers charge so much money” but they also pay so much tax, said Salve, and added, jokingly, “If you see the total figure of my investment it looks big - but if you see total figure of tax paid - you will say, Mr Salve how much money do you waste right there?”
When asked for figures, he declined to comment, but when repeatedly pressed for how much he had invested and how much tax he had actually paid, he eventually confirmed that between 2004 and 2013 his tax bill came to around Rs 175 crore, with his investment being less than 10 per cent of that amount.
Salve is one of the highest-paid senior counsel who can charge between six and 15 lakh per appearance in the Supreme Court or the Delhi high court, according to data published by Mint and Legally India last year.
Comments
Most corporate lawyers and business types would call paying tax without using any avoidance or management strategy of your tax bill, a 'waste' of money.
And even those without a fortune probably use some ways to be tax efficient with their income (i.e.: writing off certain expenses against tax, etc).
And the super rich generally pay nearly zero tax, from what I understand, by using sophisticated SPV, trust, etc. structures.
As such, Mr Salve is a notable exception.
After all, they essentially create money for you, for free, and they claim it's entirely legal and confidential...
Not to say a lot of those celebs and businesspeople aren't incredibly greedy, but that's a different issue...
Salve is a CA himself. Is it his defense that he was led into illegality by his advisers?
So someone creates money for you for free and you believe that it is legal and confidential - to quote Kian Ganz, what is he smoking?
Even the facts of Salve's case are not out which will need investigating. Its strange how Kian Ganz jumps in to convey that everything was above board.
Neither is investing in mining assets, which didn't even seem to happen in this case. His friend's name is mentioned in the Express story.
I honestly don't see anything here prima facie that does not look above board and I think the Express article and his above explanations are sound.
As of now Salve stands exposed as having been involved in questionable activity. Only an investigation can bring out the facts.
Otherwise lets just accept every criminals version and let them off.
Also Seema, please read the Express article before commenting. The Express had access to the company accounts and would have said if those companies had assets in them or rebutted Salve's claim to them that they were not active. Again, there is prima facie no reason to disbelieve Salve's explanation in light of these facts.
Salve also recommended some Canadian citizens Mahajans to Mossack Fonseca. This is prima facie high risk activity? Does it sound like the kind of activity a lawyer of Salve's position would ordinarily engage in?
There appears to be dirt waiting to be uncovered.
I think that this is rightly in-part an issue of privacy - why does the friend have to be named? Why do his investments (which never happened) have to be disclosed in the media, if everything has been disclosed in his returns (and will be available now to tax authorities and the black money task force)?
Is it illegal to plan investing in assets abroad? Is it illegal to plan investing and then not to invest?
Salve has a fair point I think that including him in the list, despite the Express having apparently had no evidence but the existence of some BVI companies, is unfair since it opens him up to suspicion, as you have amply shown.
It is not for Indian Express to rebut Salve. We don't know what Indian Express has. We know what they have disclosed. Salve has responded with his version. Indian Express is not the investigating authority here.
Merely because Indian Express has not responded further, does not imply that what Salve said has been established.
If you want to start suspecting the Express of a conspiracy and believe they are not the investigating agency, then you should also accept that you aren't an investigating agency either.
I received the following email from you just now.
"You are posting borderline defamatory stuff which has no basis in fact other than hypotheticals, and I don't have time at all today to go back and forth with you for a dozen comments. Will moderate future unreasonable comments on this along same line."
I have only repeated Indian Express disclosures, pointed out your unsustainable defence of Salve and said an investigation is needed.
Is LI a propaganda outfit or a news site?
http://www.firstpost.com/business/panamapapers-who-is-kalpana-rawal-the-other-indian-in-the-tax-evaders-list-2711420.html
Once ICIJ releases a full/fuller list of names in May, other than politicians, will be interesting to see if we find any Indian judges on the list.
And I suspect a fair few law firm partners might also have offshore holdings of some sort or other...
As for Indian politicians, I'm personally surprised by why the IE has not published any names yet - there must surely be some, no?
To my mind, the issue simply put is this. Indian Express along with other publications breaks a news story, which reports of several Indians having opened up accounts in tax havens abroad using the services of a common law firm. The news reports also confirms that monies were remitted out of India into these foreign bank accounts. There are two issues here, one as a matter of perception and the other of legal validity of such remittances.
While on the face of it these structures to remit funds out of India into bank accounts located in tax havens may appear to be legal, they do at the same time raise eyebrows and suspicion. Tax avoidance, unlike tax evasion, by transferring funds abroad is legally permissible but perhaps not desirable since it nonetheless leads to flight of money outside India and away from the purview of Indian authorities about how that money is being used and whether it finds it's way back into India as part of a round tripping exercise. This paper prepared by Ministry of Finance (http://finmin.nic.in/reports/whitepaper_backmoney2012.pdf) throws some light about generation and swindling away of 'black money' in the Indian context. If all such remittances are properly disclosed, and that is matter of investigation, then such remittances technically cannot be called as 'black money' as per this MoF White paper.
That said what is the threshold at which the government decides whether a set of facts at the minimum merit an investigation? This is the prerogative of the government or the investigative agency and quashing an investigation at the preliminary stage should normally not be resorted to unless the investigation was commenced vexatiously or with the intent to bring disrepute to a specific person. These factors are not met in the present case and in my opinion all the 500 Indians named in the Indian Express report should be investigated and asked to disclose their foreign remittances and other connected details. Merely because assessments are complete does not mean that a reassessment cannot be done based on subsequent developments. The Indian Income Tax Act specifically provides for reassessment and for reopening an assessment. Yes there of course is a presumption of innocence and no person should be harassed during investigation but that said, this issue certainly merits a thorough investigation and those being investigated must co-operate and encourage an impartial probe.
And LI/ Kian, Seema to my mind has not used any abusive words or defamed Mr. Salve directly. I did not expect such low thresholds of intolerance from a site I have been regularly visiting for several years now and observing. You don't have to like everything being said, but that alone would not entitle you to moderate comments and post only those good ones that you like and not the ones you don't approve of. It's your website and you can do whatever you want, no one's denying that, but in my view it does not befit the stature of LI to moderate fair comments/ dissents. Think about it please.
1. We always moderate comments to some extent and some parts of of Ms Sapra's comments - now unpublished for obvious reasons - were defamatory.
2. I told Ms Sapra by email that I would not publish some of her comments because they were defamatory, and because I simply can't justify spending a disproportionate amount of time in dealing with the comments of one person anymore.
3. She has more than said her piece and made her arguments in the comments above (which remain published) and her other comments were not adding anything substantial beyond that. Feel free to engage in correspondence with her directly if you don't believe me - her contact details can be found on her blog.
4. When I subsequently made her privileged LI account subject to pre-moderation (as every normal LI commenter's, including yours, is), she said that she would rather delete her account, and I acceded to her request.
5. I am more than happy for LI to be host to a discussion that includes all sides of the debate, but when people say defamatory things and abuse the privileges that an unmoderated user account brings, it ends up wasting my time that should be more fruitfully spent on other things.
6. Finally, you make a valid point that I don't think anyone disagrees with, and I believe that the government investigation will look at every name in the MF files that is public.
If Mr Salve's accounts are not in order, I would expect that to emerge in the investigation, but for the time being, in light of his statements and his track record, I believe he deserves the benefit of the doubt, don't you?
I originally asked her to create an account since someone was impersonating her in the comment section, so that no one else could use her ID.
Feel free to judge those comments on their own merits and whether they should have found space on LI without moderation.
Alas, Ms Sapra has not posted my rather reasonable responses to her emails, though it hardly matters - I would laugh about it but it's all too sad a situation really that I've witnessed for a long time now and I honestly think there's little hope for things getting better.
Notwithstanding my pessimism, I wish Ms Sapra all the best and hope she will find assistance and what she seeks...
Since our somewhat liberal comments policy has long-been a thorn in the side of the profession, we have modified our approach a bit for the last year or so to moderate more strictly and to quickly rebut or provide balancing arguments to comments that are borderline defamatory if left to stand by themselves.
If Sorabjee and Salve have done nothing wrong, as they claim, will they disclose all the records and papers tied to the British Virgin Islands and the Mr Fonseca of Panama?
At what point should an individual who does not hold any public office be under an obligation to disclose all their private financial records in public? Surely if such records are disclosed to the Revenue that should be sufficient?
Why should we have the right to demand of Sorabjee, Salve or even some of the industrialists on the list to disclose to the public their private affairs (however much we may dislike some of those individuals).
Sure, it's hard to feel sympathy for those rich enough to be able to afford BVI SPVs, but we still must be aware of the danger of a trial by media in such cases.
The biggest problem the Iceland PM faced, from what I understood, is that he was allegedly hiding his money in offshore accounts and holding secret stakes in Icelandic banks, while the country's financial system collapsed. For a politician that's akin to suicide, if not corruption.
The reason why Sorabjee and Salve who are "private" citizens should have an obligation to disclose their financial records is that these schemes in India were floated ONLY for the benefit of the rich and powerful. Would any AAM Janata have $250,000 to remit each year to an investment vehicle abroad. Only the Sorabjee's of India can afford that kind of money.
The irony is the Sorabjee's and the Salve's of this world use a Panamanian lawyer to float a company in the BVI (known as a tax haven). Salve claims that that the three BVI companies he had been involved with had zero revenues and were inactive and that
he had never had any bank account in the BVI, but only set up a company there when he wanted to invest in the UK. There is smoke here. How can a legitimate company have zero revenues? And why set up a company in the BVI when the intention is to invest in the UK?
India needs to investigate whether the use of these RBI guidelines of US Dollar remittances abroad benefit our country or only the rich and the powerful like the Sorabjee's and the Salves' and the Bachchans.
As for your question "how can a legitimate company have zero revenues" - well, 99% of shelf company SPVs that are sitting around on the books of law firms have zero revenues and are still legitimate companies (though perhaps not legitimate businesses).
They are many lawyers in India of the caliber of Salve. They appear in arbitration matters in UK and in India. None of their names are in the Panamanian papers. Does this mean that they did not know of these innovative tax and investments structures? Or did they not choose to use them?
2. An SPV is never really a legitimate business - by definition they are special purpose vehicles, that exist for the sole purpose of structuring. I agree and think all this offshore structuring is deeply problematic, but it's not illegal unfortunately.
When I worked in corporate law setting up SPVs as part of deals was par for the course, particularly when I once stumbled into a CDO squared deal by accident, which was a frightening experience :)
I am not questioning the legality of the structures employed by the Sorabjee's and the Salve's of this world or that they did not follow the guidelines. What I cannot wrap my head around are the statements by Sorabjee that the it was set up in accordance with Reserve Bank of India (RBI) norms and was fully declared on his returns or by Salve that between 2004 and 2013 his tax bill came to around Rs 175 crore, with his investment being less than 10 per cent of that amount.
The proper question is how much of the income was sheltered and as a result the amount of tax saved by the Salve's and the Sorabjee's of this world. Why employ such an investment structure in the first place if the intention was just to remit $250,000 each year.
What makes it difficult for me to believe the Sorabjee's and the Salve's is when I read article referred to below (perhaps you should read the entire series):
http://www.nytimes.com/2015/02/10/nyregion/kabul-chawla-bptp-india-real-estate-manhattan.html?module=RelatedCoverage
In particular I would like to refer you to the following language in the article
"When the contract was finally drawn up, it contained special language permitting the purchaser to transfer ownership to a limited liability company, which “may be owned by a Cayman Island limited liability company or a British Virgin Island limited liability company to be formed, and/or to a trust.”"
Are the Indians on the Panama Papers list using these shell corporations for nefarious purposes? It is a question worth pursuing.
I don't know the facts, but Salve's statements imply that he remitted Rs 0 into those SPVs.
The 10 per cent investments figure he mentions, I am not sure was referring to 10% of Rs 175 crore invested into the BVI companies, but presumably his total foreign and Indian investments, including mutual funds, etc?
But let me also construct a hypothetical for you. The Sorabjee's and the Salve's of this world got somebody to purchase a flat for them in the Time Warner building (say a client) in New York. That client then transfers ownership of the flat to the BVI shell corporation owned by a Sorabjee or Salve. So Sorabjee and Salve have reported their investments on their tax returns and have followed the RBI guidelines. Yet they own a flat in New York and no one knows about it. Besides they have also sheltered the income received by purchase of the flat by their client.
I still cannot understand the reason for setting up a BVI company except for sheltering income or other nefarious purpose. Can you come up with some reason tto set up such a corporation in the BVI.
I'm not a tax lawyer, so no, I can't really think of any good reason and the hypothetical you are proposing sounds like classical tax evasion.
In the specific case, Salve claims he started one of the SPVs because he didn't want to become tax resident after planning to invest in the UK (i.e., he presumably didn't want the hassle of having to file tax returns in the UK?). That would have been independent of his spending more than 180 days per year in the UK (since it was before he began to work there regularly as a barrister).
So, can you become tax resident in the UK by holding shares or the like in a UK company? Finally, presumably since he says he declared that SPV, it would have been taxable in India?
Again, we don't really know enough about the other situations to even speculate properly. Or in any case, I with my limited knowledge of tax law don't.
Anyone who knows what they're talking about want to pitch in for a list of some super legitimate reasons for starting a BVI company?
The way out of this nightmare for them and others is to lay before the country ALL the documents related to their corporations in the BVI, including but not limited to the financial statements of these companies since inception. The nightmare will only get worse as more names will be brought to light.
For Salve what you suggest may be arguable - he is at least a public figure and formerly solicitor general.
But Jehangir Sorabjee, as far as I'm aware, is a doctor and a professor at a university. Just because he is the son of a public figure, should not automatically mean that we have a right to his private financial affairs if the income revenue isn't eventually interested?
I can stipulate, for the sake of argument that he has a zone of privacy. But his name is now in the papers; he is linked forever with a shady law firm in a country known for laundering money. He has a corporation set up in the BVI. It will be a recurring public relations nightmare for him. He can claim the zone of privacy as I have stipulated, but to what avail? Do you not think that is better for him to clear his name by revealing all?
Can someone please answer the question of whether there is a super legitimate reason for setting up a BVI company?
How many ordinary people would be happy to tell their neighbours about their exact salary, how much their house cost, how much they pay for kids' education, what they spend on family holidays, etc etc?
Listened to the Economist podcast on this issue yesterday, and their chief finance correspondent listed two examples of legitimate uses of offshore SPVs that I recall: avoiding double taxation, and hiding money if you live in a country where criminals are likely to extort or blackmail you. He also said that the vast majority of transactions and SPVs set up by MF were probably legitimate, for what it's worth, which sounds reasonable - the offshore industry might be dubious, but it's not a criminal organisation and their services are used by every corporate law firm and bank in the world.
So if Sorabjee wants to remit his Rupees to his BVI Corporation, the Indian Bank will be required to do a KYC of his BVI Corporation. If KYC is refused, no Indian bank can do business with Sorabjee's or Salve's BVI companies.
2. I think the current climate is such that people want to believe the worst about everyone in respect of corruption, particularly when it comes to those with money, and then some nuance is lost (i.e., the comment above managing to misread Salve's joke about 'wasting' money).
3. I don't necessarily agree with or know everything Mr Salve does or stands for, but from everyone I've spoken to, I do think he has a reputation as an honest and respected lawyer, and would agree that just naming and shaming those who may have (apparently legally) used offshore tax structures seems unfair.
4. I often respond directly to commenters :)
On other stories, I think there were one or two of her comments that were too far and that we moderated, but generally her arguments, if a bit lengthy and too many in number, were not attacking any individuals and were valid arguments to make, even if you disagreed.
R.I.P. journalism
If I decided to fight for your comment in court against Ms Sapra, I wouldn't feel good about it and neither would Ms Sapra at the end of it all.
I have finally come to the point, nearly a year after first having tried to engage with her and to try to learn about her grievances and problems, that some issues are best to ignore and leave alone, for my own sanity.
We are disgusted when same legal reasoning and argument which Mr. Salve gives are not judicially taken note of when we give. Law is reason. There is no law that is not the reason.