Asks OECD to review banking transparency; upbeat on India’s growth
As the pressure mounts on the government to repatriate money illegally stored abroad, finance minister Pranab Mukherhjee today lambasted some tax havens for persisting with bank secrecy provisions, despite G-20 nations asking for transparency.
He asked the Organisation for Economic Cooperation and Development (OECD) bloc to review the legal framework to pressurise these countries to share information, as parking of money abroad by some Indians was denying the exchequer its due share.
He also attacked abusive transfer pricing behaviour by some multi-national companies as robbing developing countries of resources that could be used for development.
The minister spoke at a high-level tax seminar here, organised as part of a continuing dialogue between the OECD and India on economic policies. Mukherjee said the growth drivers broadly remain intact, even as there was deceleration in industrial growth due to the “base effect”. His comments came in the wake of fears expressed in certain quarters about slowing of the Indian economy.
Tax evasion
“A statement of G-20 leaders in London in April 2009 said that the era of banking secrecy was over. However, the spirit of this statement has not been respected. We cannot say with certainty that the bank secrecy is over in all cases,” he said.
This puts a question mark on the efficacy of present legal provisions for exchange of banking information, Mukherjee said.
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Blaming tax havens and low tax jurisdictions for being important actors in the global financial crisis, he expressed concern over their opaque system and non-compliant behaviour.
“The concerns are not only on account of protecting the revenue base but also linked to financing of activities detrimental to national security, he added. He later told reporters India had sufficient tools to deal with non-cooperative tax jurisdictions.
He said competition driven by the presence of tax havens had created an unhealthy situation that helped individuals to park substantial undisclosed income outside their countries.
“This is also true of some Indian citizens and residents, in the process denying legitimate tax revenues to the country. The Government of India has committed to vigorously pursue all the necessary steps in coordination with countries concerned on this issue,” he said.
Taxes, growth
As cross-border transactions gather pace, the minister said rising disputes in international tax matters were an area of concern. “Due to linkages in the global economy, the tax disputes are not only bilateral in nature. They have assumed a multilateral character, involving multiple countries,” he said.
Despite these problems, the Directorate of International Taxation has mobilised tax revenue of Rs 22,697 crore and the Directorate of Transfer Pricing has detected mispricing of Rs 22,838 crore, he added.
OECD secretary-general Angel Gurria said despite India’s impressive development in the area of transfer pricing, it is facing enormous challenges in the administrative implementation of the transfer pricing rules.
Allaying apprehensions of a slowing in growth, Mukherjee said: “The medium-term growth prospects of the economy remain buoyant. The savings and investment rates have reached levels reminiscent of the East Asian high growth economies.”