Sunday, Nov 23, 2014

SIT on black money decides to solve tax treaties’ secrecy puzzle

Black-Money Tax heavens soon to crumble (Source : Express Archive)
Press Trust of India | Posted: June 8, 2014 12:54 pm

Tasked with the job of recovering illicit wealth stashed away by Indians, the SIT on black money has decided to look into the contentious issue of secrecy clauses in India’s tax treaties with Switzerland and other countries.

India has signed tax information exchange treaties with many countries, but they typically contain a ‘confidentiality’ clause which forbids sharing of details obtained through such treaties with other law enforcement and investigation agencies, thus coming in the way of coordinated actions by them.

At the centre of discussion of the Special Investigation Team (SIT) — headed by retired Supreme Court Judge MB Shah — are close to half-a-dozen black money cases in which information has been received from a foreign jurisdiction by the Income Tax Department or allied agencies, sources said.

However, this information cannot be shared with any other investigative agency as a strict non-disclosure of information clause accompanies these information exchange treaties, they added.

The SIT, sources said, would look into the possibility of requesting competent courts and the relevant authorities in foreign jurisdictions for permission to share with other agencies the data obtained by the Central Board of Direct Taxes (CBDT) and the I-T department.

The agencies for which the data access could be requested include Enforcement Directorate (ED), Directorate of Revenue Intelligence (DRI), Reserve Bank of India and CBI, so that suspects in such cases can be probed from various angles and under provisions of criminal laws.

CBDT and Income Tax department obtain data from foreign nations and tax haven jurisdictions under Double Taxation Avoidance Agreements (DTAAs) or Tax Information Exchange Agreements (TIEAs).

Officials said that a full-fledged foreign exchange violation and money laundering probe in the LGT Bank accounts case has been slowed down due to restrictions on information- sharing between various agencies.

“The agencies only have access to a limited number of documents in the LGT case and hence the probe is not (progressing at the pace it) should. If the documents are available, prosecution can easily be started in these cases with regard to contraventions in the foreign exchange domain and possibly money laundering laws too,” officials said.

India, at present has over 80 operational DTAAs and 40 TIEAs.

The government had imposed a penalty of Rs 24.66 crore on 18 individuals who have bank accounts with Liechtenstein’s LGT Bank on the basis of information provided by German authorities.

Germany had in 2010 provided the names of some Indians who held secret accounts in Liechtenstein’s LGT Bank. These names were part of about 1,400 stolen bank account details purchased by Germany.

The Income Tax department alone has reported collecting 7,704 “discrete items” of information from treaty countries containing details of payments received by Indian citizens in various countries, besides information on LGT bank accounts.

The government had said that this information is in “various stages of processing and investigation”.

Also, during the last financial year, CBDT’s foreign taxation wing made more than 175 requests to treaty partner countries in case continued…

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