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At a time when many are questioning the confidentiality clauses in tax treaties, Finance Minister Arun Jaitley on Sunday said not joining the global initiative for automatic sharing of information on tax matters and not signing the US Foreign Account Tax Compliance Act (FATCA) are not in the country’s interest. He called for changing the general view that these clauses are unconstitutional.
Jaitley added disclosing the names of black money account holders without prosecution would actually help the persons concerned and not the other way round.
“India has to take a conscious call. Does it want to be a part of the global coalition, which is moving in the direction of automatic sharing of information or not? Does it ensure all information is supported by substantial evidence and proof or only wishes to remain restricted to sloganeering?,” Jaitley said, through a post on his Facebook page.
On October 29, India was supposed to sign an agreement worked out by the Organisation for Economic Co-operation and Development (OECD) for automatic exchange of information on bulk taxpayers. However, India did not sign the agreement after the Supreme Court asked it to submit a list containing 627 names of people holding accounts in the Geneva branch of HSBC Bank’s Swiss subsidiary HSBC Private Bank. The government was not sure of the apex court's ruling on the confidentiality clause in tax treaties, so it did not sign the OECD pact.
The apex court, in turn, handed over the list to the Special Investigative Team (SIT) probing black money cases. SIT is to give a status report, including its interpretation of confidentiality clause, by November-end. The Supreme Court is slated to hear the case on December 3.
Jaitley said India could not sign the agreement because of the prevalent view that confidentiality clauses are unconstitutional under the Indian law.
“This view requires reconsideration,” he said.
An automatic exchange of information would relate both to authorised and unauthorised movement of money, he said, adding: “Why should any information with regard to authorised movement of money be made public? Why should information even in relation of unauthorised movement of money be made public only for political or collateral purposes? Why should the account holder be alerted in advance? It should be put to an authorised use with collection of evidence and filing of prosecution.”
Ram Jethmalani, who had filed the public interest litigation on the matter three years ago, had told the court the citation of double-taxation treaties and confidentiality clauses were a “fraud”.
Jaitley also explained that India has to sign an agreement with the US on FATCA. If India does not adhere to the confidentiality clauses, there could be a problem in signing the agreement. Not signing it would mean that remittances from the US to India are subjected to 30 per cent withholding tax.
“It will negate the efforts being undertaken by our government to revive the Indian economy,” said the finance minister. economy
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