Unnoticed by the press, India has concluded its first tax information exchange agreement (TIEA) complying with OECD standards in the fight against tax havens. The information was shared by the finance ministry with visiting Organisation for Economic Cooperation and Development (OECD) head of taxation Jeffrey Owens. “We understand that the announcement of this first tax information exchange agreement, with Bermuda, is now just a matter of days. We have been told that one more (tax information exchange agreement) is to follow soon,” Owens said. The Bermuda press has indeed made this announcement on Friday, quoting the country’s finance minister Paula Cox.

Bermuda's prime minister Ewart Brown was in New Delhi earlier this week and the country's TIEA team accompanied him. The country is a significant port for foreign direct investment into India. Some banking investments there have been cited as controversial. A tax information exchange agreement will give OECD-mandated exchange to Indian tax authorities and their requests in cases of special inquiries will be better equipped to tackle tax evasion.

Owens was here to represent OECD at the steering group of the global forum on transparency and exchange of information for tax purposes. The meeting was chaired by Australia and besides OECD was attended by US, Japan, China, UK, Germany, France, South Africa, Brazil, South Africa, Singapore. Bermuda and the Cayman Islands.

In an interview, Owens noted with satisfaction that 300 such agreements have been signed in the last one year. “OECD believes that the era of banking secrecy has begun to end. Expect the first results by the year end,” he said, refusing to be discouraged by the recent decision by Switzerland to walk off from such a treaty with France. The treaties provide for transparency and exchange of information for tax purposes but on the strict assurance of maintaining confidentiality and avoiding misuse.

“It is encouraging to see large developing economies like China, India, South Africa, and Argentina make progress. Here India has played a lead role in this exciting development that potentially unleashes large amounts of incentive for honest people to pay taxes when they see accountability in tax being stashed by the upper club.”

Owens expected India to benefit when “a web of such treaties” is available. He confessed that this “upper club” of tax evaders still has many options to move around their slush money, but hoped that more and more jurisdictions will enter into these agreements, leaving very few out there choosing to be ostracized. One such mechanism, he said, would be when agreements crafted multilaterally will be available for ratification bilaterally, in fact, to all countries even outside the OECD.

Owens said he was impressed by investments being made by India in upgrading its revenue staffing and resourcing so as to reap the benefits of the OECD gold standards. He also expected India to use the provisions to upgrade its double taxation avoidance agreements, “specially those where a review otherwise is potentially difficult.”

“The next priorities are speeding up the negotiation process, enhancing the engagement of developing countries and implementation of the agreements. These will start happening when the peer review process starts.”

The model was developed by the OECD in cooperation of non-OECD countries and was endorsed by G20 finance ministers in Berlin in 2004 and by the UN panel of international tax matters in October 2008 requiring exchange of information on requests in all tax matters for the administration and enforcement of domestic tax law without regard to domestic tax interest or banking secrecy for tax purposes. Bermuda has 19 tax information exchange treaties. Even Singapore has 12 and Costa Rica one. All major offshore centres have endorsed the OECD standards.