India takes first step to bring back black money from abroad

Concludes tax information exchange agreement with Bermuda, major source of FDI

prasanna

Prasanna Mohanty | February 19, 2010


Jeffrey Owens, taxation head of Organisation for Economic Cooperation and Development (OECD)
Jeffrey Owens, taxation head of Organisation for Economic Cooperation and Development (OECD)

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.

Comments

 

Other News

Making sense of facts – and alternative facts

The Art of Conjuring Alternate Realities: How Information Warfare Shapes Your World By Shivam Shankar Singh and Anand Venkatanarayanan HarperCollins / 284 pages / Rs 599 Professor Noam Chomsky, linguist and public intellectual, has often spoken of &ls

The Manali Trance: Economics of Abandoning Caution in the Time of Coronavirus

The brutal second wave of the COVID-19 pandemic in India has left a significant death toll in its wake. Health experts advise that the imminent third wave can be delayed by following simple measures like wearing a mask and engaging in social distancing. However, near the end of the second wave, we witnesse

Govt considers fixing driving hrs of commercial vehicles

Union Minister of Road Transport and Highways Nitin Gadkari has emphasised deciding driving hours for truck drivers of commercial vehicles, similar to pilots, to reduce fatigue-induced road accidents. In a Na

Telecom department simplifies KYC processes for mobile users

In a step towards Telecom Reforms which aim to provide internet and tele connectivity for the marginalised section, the Department of Telecommunications, Ministry of Communica

Mumbai think tank calls for climate action

Raising concerns over rising seawater levels and climate change, Mumbai First, a 25-year-old public-private partnership policy think tank, has written letters to Maharashtra chief minister Uddhav Thackeray, minister for environment and climate change, tourism and protocol, Aditya Thackeray and Mumbai munic

Creation of ‘good bank’ as important as ‘bad bank’ for NPA management

After the recent announcement of the government guarantee for Security Receipts (SRs) to be issued by a public sector-owned National Asset Reconstruction Company Ltd (NARCL), there is a surge of interest around this desi version of a super bad bank. The entity will acquire around ₹2 trillion bad debts fr

Visionary Talk: Gurcharan Das, Author, Commentator & Public Intellectual on key governance issues


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter