The Supreme Court’s fiat to the government to disclose the names of all Indians holding bank accounts abroad, in a sealed envelope, may force India to renege on a commitment it had made to join the global war against tax evasion. That’s unfortunate. The court has said it cannot change an earlier order directing the government to disclose names of persons who have bank accounts abroad but with no evidence of tax evasion in India.
So, India will skip a crucial meeting organised by the Organisation for Economic Cooperation and Development (OECD), a club of rich countries, in Berlin today. Many countries gathered there will ink a new pact to boost worldwide efforts to crackdown on tax evasion. The pact, known as automatic information exchange, is part of the OECD’s campaign to end base erosion and profit-shifting by multinational companies. Effective informationsharing will come in handy to establish audit trails in a globalised economy in which MNCs undertake complex deals to escape taxes.
The OECD has developed the new standard on automatic information exchange based on a mandate from the G20 that has been turning the heat on tax havens. Many developed countries, starved of revenues with their economies slowing down, hope to recover money to meet their spending needs through such novel efforts.
Rightly, India aspired to be an early adopter along with rich countries and, surprisingly, some tax havens such as Cayman Islands and Jersey, marking a step towards more transparency.
The message was conveyed by GoI to the Supreme Court. “India is on the verge of entering into bilateral and multilateral agreements for automatic exchange of information that will greatly help in our fight against black money stashed in financial accounts and assets maintained overseas by Indian taxpayers,” it said in its affidavit to the apex court.
The automatic information-sharing pact will enable the government secure details about Indians hiding their money in offshore centres and tax havens through multilayered entities with non-transparent ownership. It will help Prime Minister Narendra Modi meet his poll promise to track down unaccounted wealth stashed overseas with alacrity.
So what’s the catch then? The pact mandates confidentiality. India simply cannot violate it if it wants to be a signatory. To sign Competent Authority Agreements (CAA) with other countries, every country, including India, has to make a commitment that such information can be used only for tax purposes and will be made public only when the investigation is complete and a complaint or prosecution is filed in a competent court for tax evasion, the pact states.
This means information cannot be made public if a probe is underway as it would violate the right to a citizen’s privacy. Also, every account held by an Indian in a foreign country cannot be deemed as illegal. The crucial question now is whether the names demanded by and handed over to the Supreme Court will remain confidential or not.
Our existing bilateral tax treaties require New Delhi to maintain confidentiality until the tax office concludes criminality and files a prosecution case in the court. Breaching confidentiality has wider ramifications.
India may not be able to sign the proposed Inter-Governmental Agreement (IGA) with the US for automatic exchange of financial information. Under the pact, financial institutions in India must share information on US taxpayers, and Indian banks could lose business if India doesn’t comply. That, in turn, could hamper trade.
True, the US may have flexed its muscle to get other countries to sign the IGA. But the silver lining is that the US will also have to share information on Indian taxpayers — something that any other country will have to do once automatic exchange pacts are signed by countries across the world.
India’s hopes to become a signatory of the OECD’s automatic information-sharing in due course may have been dashed with the latest court order. We might need more of these court monitored special investigation teams that we could have done without to probe black money.
http://blogs.economictimes.indiatimes.com/Exchequer/black-money-india-misses-the-global-war-against-tax-evasion/
My Views--
It is known to all that money in foreign banks have also been remitted through Indian Banking channels only. According to report submitted by Global Financial Integrity , illicit financial outflows are a massive problem for India. There is no doubt in it. But it is also said by same GFI that India lost 343.9 billion US dollars to illicit outflows from 2002 to 2011 i.e. during UPA rule led by none other than Congress Party whose leaders are loudly blaming BJP for non-disclosure of names.
If India really want to get back money from abroad, the government will have to first prepare the list of accounts in foreign banks which are unauthorised. If the such list is possible to be prepared, then GOI will have to look into all outflows and decide the nature of each remittance . If outflow of money is used for import of goods and services , GOI cannot treat it as illicit.
Yes here it is also true that person or company who decide to park black money used the banking channel by inflating import bill or by making fake import bill. Exporters also used banking channel to export goods at cheaper rate officially and then getting payment at rate which is difference between rate quoted and actual market rate through their foreign bank account. Both ways , Indian business houses accumulated balance in foreign banks and the same was done through legal processes only.
Obviously it is very difficult to ascertain the nature and colour of each remittances. However if the apex court decides to treat all unauthorised accounts as black money account or all money held their above benchmark as black money, Supreme Court will have to define the process of identification of unauthorised and illegal accounts. After all it is the government of India which permitted the opening of account in foreign bank through Indian embassy or through accounts of NRIs.
It is therefore not easy in my view for Supreme Court to disclose the names of all terming them all as illegal and black in nature.
Secondly , it is not easy and desirable for Supreme Court to ignore international practices, treaties and rules of ethics of maintaining secrecy of banking transactions. If Supreme Court decides to obey only Indian existing laws only without caring for future of relationship with other countries , it may order set up a separate body or instruct SIT to speed up scrutiny of each account and submit the colour of them within a timeframe set by it. There is no doubt in it the task involved is time consuming and not very easy. However by asking list of names , Supreme Court may allay the fear of discriminating treatment by the government .
Also Read others informations on Black Money
India’s banking industry at moderate risk along with Brazil and China, says S&P-LiveMint
Switzerland is the only country in group 1, while group 10 has Belarus, Egypt, Greece, Jamaica and Ukraine
Mumbai: India’s banking sector has been placed in the middle of the global pile in terms of country risk assessment by global credit rating agency Standard & Poor’s (S&P).
In a release on Tuesday, S&P said India’s banking sector was classified as group 5 along with Brazil, China, Italy, the UAE, Poland, South Africa, Colombia, Trinidad and Tobago, Bermuda and Panama.
S&P assesses banking industry risk for countries on a scale of 1 to 10 where 1 is the lowest risk in the banking system and 10 is the highest.
“India’s economic risk trend, which affects the banking sector, is negative, in our opinion. In our view, although the new government has the willingness and capacity to implement reforms necessary to restore some of India’s lost growth, we see only a gradual economic recovery. We expect risk from economic imbalances to be low in the near term as credit growth could remain moderate and inflation-adjusted property prices are likely to decline,” S&P said in a note, even as it flagged the rising risks associated with the weakness in asset quality of banks.
Switzerland is the only country in group 1, while group 10 has Belarus, Egypt, Greece, Jamaica and Ukraine.
Banking industry country risk assessment (BICRA) is the starting point for S&P to assign issuer credit ratings for banks.
The rating agency pointed out that India’s banking sector is underpenetrated with “a large section of the population still not having access to bank credit or deposit accounts.”
“We therefore see room for Indian banks to grow. Competition could intensify marginally for low-risk assets amid high risk and moderate growth. In our view, Indian banks’ large deposit base and ability to issue long-term senior bonds to fund infrastructure loans, and a buoyant capital market will continue to support their funding profiles,” S&P said.
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