Indians hold assets abroad through multiple trails of offshore shell companies and hundreds of accounts in tax havens. Tax officials haven't shown the gumption or means to track these assets, leave alone confiscating them. All the authorities possess as evidence is a so-called 'HSBC list' that contains names of Indians who have hoarded wealth in the Swiss unit of the banking major.

This is actually stolen information by a bank employee, which the French government shared with India. The Times of India, quoting unnamed government officials, reported on Thursday that the HSBC list is of no use because it contains no big names, the entries are too old and accounts have little money.

Talk about an anti-climax. India's best bet is to join other countries in turning the heat on tax havens. But even this plan faces uncertainty owing to a Supreme Court order seeking full disclosure on illegal bank accounts held abroad. The court order has muddied the emphasis on secrecy in bilateral tax treaties that facilitate exchange of information (see The Swiss Conundrum).

The government's peekaboo policy of revealing three names on the HSBC list too didn't help. No surprise then that India has delayed signing a crucial international agreement aimed at automatic financial information on tax evasion, which could help secure information about Indians hiding money in tax havens. Pretty bleak, right? Say, the government by a stroke of luck receives information. Good luck with that because prosecutions are painfully long.

Core Issue

Against this grim backdrop, Jaitley's directive is welcome. But he too has not addressed the heart of the scourge of black money in India — the way political parties finance themselves. It is no secret that all parties depend on donations, but the manner in which they collect money is largely shrouded in secrecy. "Nearly 75% of their funds are from undisclosed sources," said SY Quraishi, former chief election commissioner.

Even the records of money parties have submitted to the Election Commission (EC) show a kind of guile bordering on illegality. The Congress, for example, has declared that more than a third of its total income of Rs 2,365 crore between 2004-05 and 2011-12 was generated by sale of coupons to, well, mostly its own workers and leaders, according to a study by Association of Democratic Reforms (ADR), an organization that pursues political reforms.

EC officials say coupons are nothing but a tool to collect money from outsiders and source it to party members. One would expect Samajwadi Party to find donors aplenty in Uttar Pradesh, where it rules. But it has listed just three donors (in 2012-13), two of whom reside in West Bengal of all places. The duo made 11 contributions totalling Rs 2.19 crore. Nine of those contributions came from Aditi Sen, a resident of Salt Lake City, Kolkata.

Two contributions were made by Sundeep Sen, a resident of the same address as Aditi. There are plenty of similar examples for every major party. As it happens, the donations disclosed are peanuts compared with the amounts parties raise in the run-up to elections. In June 2011, the government tasked a committee to study black money. Its observations make for startling reading.

"The two major national parties [the Congress and BJP] claim to have incomes of merely Rs 500 crore [$81 million] and Rs 200 crore [$32 million].

But this isn't even a fraction of their expenses. These parties spend between Rs 10,000 crore [$1.6 billion] and Rs 15,000 crore [$2.4 billion] annually on election expenses alone," said the report.

Indeed, it costs parties a bomb to run a decent campaign. Lakhs have to be spent on just a rally — on publicity, choppers and vehicles, booze and money to lure volunteers and so on. "Election financing is the best example of the existence of black money in India," said a senior EC official.

A New Path

On August 29, the EC issued a set of guidelines aimed at bringing transparency and accountability in the funding of political parties during "elections and other times" (see The New Transparency Rules...). The guidelines, which came into effect from October 1, call for parties to maintain records of all donations and make all payments beyond Rs 20,000 by cheques or drafts.