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In what can be construed the Aam Aadmi Party (AAP) effect, the Centre has expedited measures against graft and black money. After cracking down on Cyprus for not sharing information, the government is getting tough with other non-cooperating jurisdictions and setting up offices abroad to tighten the noose around evaders.
Prime Minister Manmohan Singh has cleared the long-pending proposal to set up income-tax overseas units (ITOUs) in eight more countries, finance ministry officials said. Interestingly, the decisions came after the results of Assembly polls last month, characterised by Congress' defeat in four major states and the impressive debut of AAP in Delhi.
ITOUs, which facilitate and expedite the exchange of information process under double-taxation avoidance agreements (DTAA), were established in Mauritius and Singapore earlier. Later, the government announced to create ITOUs at Cyprus, France, Germany, Japan, the Netherlands, the United Arab Emirates, the UK and the US. The decision, however, has come only now. India has been putting pressure on tax havens to share information in whatever way it can. DTAAs are being renegotiated and new Tax Exchange Information Agreements are being signed. When it blacklisted Cyprus for not sharing information, the move was to send a strong message to other tax havens that India could take a similar action against them.
Acting upon the list shared by France giving names of Indians with secret bank accounts in HSBC Geneva, the tax department has been issuing notices to people who are not sharing information. In this case, Finance Minister P Chidambaram recently wrote to Switzerland as without its help the Indian government cannot make much headway.
Switzerland is one of the countries along with the UAE, Samoa and Seychelles, giving taxmen a tough time in dealing with people who have stashed money aboard. "We are taking whatever measures could be taken to unearth black money. The finance minister's letter can build ground for a Cyprus-like action against Switzerland, but it may not be required as the country may share information now," said an official requesting anonymity.
Corruption is also a key item in the five-point agenda of Congress Vice-President Rahul Gandhi. In the Budget Session of Parliament next month, the last session before the general elections, the government is planning to ensure the passage of some anti-corruption legislations, which have been flagged by Gandhi and are part of the Congress agenda. These include Whistleblowers Protection Bill, Judicial Accountability Bill, Prevention of Corruption (Amendment) Bill, Citizens Charter Bill, Timely Delivery of Services Bill and Public Procurement Bill.
India has also prevailed up on Mauritius to insert a clause on limitation of benefit in their DTAA to address round-tripping of funds.
Besides, the finance ministry is also trying to streamline the process to resolve tax disputes and avoid base erosion. It is negotiating with the US and other countries over mutual assessment process and brought in advance pricing agreements.
India is also becoming part of a global crusade against tax evasion. It is working closely with G20 on formulation of Common Reporting Standards. This will allow all the member countries to automatically share information pertaining to tax.
