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PM Modi steps in: Income Tax, RBI panel to probe Panama Papers trail

"PM Modi has himself requested that this matter be investigated... I think it's a healthy step that this kind of exposes are being made," Finance Minister Arun Jaitley said, reacting to The Indian Express story.

By: ENS Economic Bureau | New Delhi |
Updated: April 5, 2016 11:33:00 am
Panama, Panama papers, panama papers india list, news, india news Prime Minister Narendra Modi and Finance Minister Arun Jaitley. (file photo)

Announcing it was acting on the directions of the Prime Minister, the Government said Monday it was constituting a special multi-agency group to look into all cases of Indians setting up offshore entities in tax havens after The Indian Express published the first set of names as part of its ongoing investigation in The Panama Papers.
Welcoming the information brought out by “any investigative journalism”, the Finance Ministry, in a statement, said the group, comprising officers from the investigative unit of the Central Board of Direct Taxes (CBDT) and its Foreign Tax and Tax Research division, the Financial Intelligence Unit (FIU) and the Reserve Bank of India (RBI), will monitor the flow of information in each case.

READ: Ministry of Finance response to Panama Papers leak

“The Government is committed to detecting and preventing generation of black money. In this context, the expose of Panama Papers will further help the Government in meeting this objective…The Government will take all necessary actions as required to get maximum information from all sources including from foreign governments to help in the investigation process,” the Ministry said.

WATCH| Explained: What Do The Panama Papers Reveal

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“India is also concerned that there are countries in the world which are being used as tax havens because of which all other countries of the world suffer loss of tax. The recent initiative of Base Erosion and Profit Shifting (BEPS) will help India and other countries in checking this practice of tax-avoidance through such tax havens. India is also fully committed to the BEPS initiative,” it stated.

The Panama Papers are more than 11 million documents from the secret files of Mossack Fonseca, a law firm headquartered in tax haven Panama, known for its factory-like production of offshore companies for its worldwide clientele of the well-heeled.

These records reveal a list of individuals who have paid the firm — and bought the benefits of the secretive, lax regulatory system in which it operates — to set up offshore entities in tax havens around the world. And Mossack Fonseca’s eagerness to meet their demands, each one for a fee, that helps mask real ownership but still show compliance.

READ | Tracking Panama cash trail: How Mossack Fonseca stonewalled Delhi 

The records were accessed by Munich-based newspaper Suddeutsche Zeitung which a year ago collaborated with the International Consortium of Investigative Journalists (ICIJ) and, in turn, with over 100 media organisations, including The Indian Express, to investigate its contents.

WATCH | Panama Papers: Big Names In The Indian List

Incidentally, the Finance Ministry statement also referred to the “Offshore Leaks”, published by The Indian Express in 2013: “In the past also, based on the investigative journalism of ICIJ in 2013 in which the links of 700 Indian persons were shown to have business connection with offshore entities, the Revenue Department, Ministry of Finance, Government of India has been able to identify 434 persons out of them as Indian residents. 184 persons out of these have also admitted their relationship with such off-shore entities/transactions.”

READ | Panama Papers: Dawood-link shadow, Iqbal Mirchi family took offshore route 

“Although, in the previous report of ICIJ, information relating to the financial transactions/bank accounts was not available, the Government authorities have detected credit in the undisclosed foreign accounts of such Indian persons in excess of Rs 2,000 crore. 52 prosecution complaints under the provision of Income-Tax Act have been filed against offenders so far,” the Ministry said.

Similarly, the Government has made progress relating to the bank accounts of 628 Indians in HSBC, Switzerland in response to information received in 2011 from Government of France — this was also first published by The Indian Express. Of the list, 569 persons have been traced as against details shown of 339 persons, it said.

READ |#PanamaPapersIndia Part 2: Politician, industrialist, jeweller

Out of 628 Indian account holders in HSBC, no action was taken for 214 on account of no balance or being non-residents or being non-traceable. Of the remaining cases, assessments have been completed in 390 cases in which undisclosed income of Rs 5,018 crore and tax demand of Rs 4,584 crore has been raised.

Concealment penalty of Rs 1,213 crore has been levied in 157 cases, while 154 prosecution complaints have been filed in HSBC cases. The Enforcement Directorate has also initiated investigation in 23 cases of HSBC and 20 cases of ICIJ expose of 2013.

READ | Panama Papers: HSBC, UBS, Credit Suisse, other banks helped wealthy hide assets

Earlier in the day, speaking at the CII annual session, Finance Minister Arun Jaitley said that with reports appearing about illegal assets, “this kind of an adventurism will prove to be extremely costly for those who have indulged in it.”

“The compliance window operated, many availed (it) but probably some didn’t and today when I see contrarian reports appearing which are not only impacting India, which are impacting the rest of the world, I think it is a stern reminder to all of us that with the G20 initiative, FATCA in place, bilateral transactions in place, with effect from 2017, the world is going to be far more transparent institution. And therefore, this kind of an adventurism will prove to be extremely costly for those who have indulged in it,” he said.

Jaitley said those who did not take advantage of the black money compliance window last year to declare undisclosed overseas assets will realise their mistake. “I had come in for adverse comment including some of my friends here when in the 2015 Budget, we had announced a strong penal law against illegal assets abroad. At that stage, I had said that those who committed mistakes in the past are getting last opportunity with a compliance window in place,” he said.

Panama Papers: A Peek Into India Express’ 8 Month Long Investigation

An Investigation by The Indian Express with International Consortium of Investigative Journalists & Suddeutsche Zeitung, Munich.

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