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Journalism of Courage
Most countries that have responded to Indias request for renegotiating tax treaties have put a spoke on the governments attempt to do away with the confidentiality clause in their existing Double Taxation Avoidance Agreement. The finance ministry has been pushing for removal of this clause along with a fresh Agreement of Information and Assistance in Collection of Information in Indias DTAA with about 75 countries.
Government officials told The Indian Express that a few Asian and African countries have responded so far,but have expressed their reluctance over the deletion of the confidentiality clause. They argue that they would not like to go against the international practices, an official said. Moreover,domestic laws of these countries do not permit such a move,he added,fearing that the exercise may be relegated to the backburner now.
The Asian countries with which India has entered into DTAA include Japan,Singapore,Armenia,Bangladesh,China,Cyprus,Indonesia,Kazakstan. India has tax treaties with Botswana,Egypt,Uganda and Zambia among the African nations. Few of these countries have,in fact,sought a comprehensive review of the entire DTAA and not just the two proposed changes.
In its DTAAs with other countries,India wants insertions of paragraphs 4 and 5 of Article 26 of the Organisation for Economic Coordination and Developments Model Tax Convention on Income and Capital. These paragraphs clarify that a state cannot refuse a request for information solely because it has no domestic tax interest in the information (paragraph 4) or solely because it is held by a bank or other financial institution (paragraph 5).
Article 26 provides for bilateral exchange of information for tax purposes and creates an obligation to exchange information that is genuinely relevant to implement tax legislation and its administration. It,however,states that countries cannot engage in fishing expeditions i.e. request information that is unlikely to be relevant to the tax affairs of a given taxpayer. In formulating their requests,the requesting state should demonstrate the foreseeable relevance of the requested information, it states.
While countries have not raised any objections to this and are willing to undertake a complete review of the existing DTAAs,they have objected to Indias other demand of exclusion of confidentiality clause. These countries dont want to go against the existing international norms (as per the OECD Model Convention). Many countries are buying time and have not yet responded. The matter is in abeyance now, the official said.
The issue of renegotiation of tax treaties gained momentum when last year Opposition parties raised a brouhaha over black money lying in Swiss banks. The country had started renegotiations with other countries as well then. The Swiss authorities had famously said even under the new treaty,Swiss banks would not allow fishing expeditions.
As per the presentations made by the finance ministry to the Parliamentary Standing Committee on Finance last year,there were 15 prioritised countries including the Bahamas,Bahrain,Jersey,Monaco and Panama for AEI&ACT.
