Bill to trace black money ready

The government has prepared a bill to confiscate illegal money stashed in India by foreigners or put away by Indians in offshore banking accounts.

“We will introduce the bill in Parliament in the monsoon session,” finance minister Pranab Mukherjee told reporters.

The bill will allow India to discharge its international obligations and enable it to put pressure on other countries to help identify and confiscate illegal funds put away by Indians in offshore banking accounts.

Last week, the government had set up an eight-member panel headed by Prakash Chandra, chairman of the Central Board of Direct Taxes (CBDT), to recommend a mechanism to recover illegal money, whether parked in India or abroad, and suggest a legal and administrative framework to deal with the menace of illegal money.

Any money earned through corrupt or illegal means or possessed by evading income or other taxes such as excise or customs duty is black money.

India, Mukherjee said, was also negotiating Double Taxation Avoidance Agreements (DTAA) with several countries and will sign Tax Information Exchange Agreements (TIEA) with tax havens.

“We are getting substantial co-operation,” he said.

The government, the minister added, is in a position to make changes in the income tax act to tackle non-cooperative jurisdictions.

One option is to slap a withholding levy, or tax deducted at source, of 30 per cent or more on payments to entities in countries and tax jurisdictions that refuse to share information.

“We have developed a toolbox... We have enabled ourselves to declare (tax havens) as non-cooperating jurisdiction and countries as and when the situation arises. We will take appropriate steps,” said Mukherjee.

However, as of now “no country” has been put in the category of a “non-cooperating jurisdiction”, he said.

The G20 leaders had asked each country at their Seoul summit last year to develop counter-measures against non-cooperative jurisdictions.

Under the provisions, the government will notify the countries that are reluctant to share banking information and other details.

Twin perils

Mukherjee today also called for stepping up multilateral co-operation to end banking secrecy and deal with the “abusive” transfer pricing mechanism.

“While the countries have agreed to end bank secrecy in general, some countries have agreed to do so only from a prospective date and are not willing to exchange past banking information,” he said.

Such issues put a question mark on the efficacy of the present legal provisions for exchange of banking information, he said. “There is an urgent need to revisit the existing legal framework developed by the OECD.”

The Organisation for Economic Co-operation and Development (OECD) is a 34-member grouping of developed and developing countries. India is also strengthening its transfer pricing provisions to stop the shifting of profits outside the country.

Source- The Telegraph, Kolkata, 14/06/2011