India completes 16 new tax information pacts

Mumbai, Oct 14 (Calcutta Tube / IBNS) India is playing a major role in the global crusade against black money and has completed negotiations of 16 new tax information exchange agreements (TIEAs), chairman of the Central Board of Direct Taxes (CBDT) M.C. Joshi said on Friday.

The pacts with Bahamas, Bermuda, Isle of Man and British Virgin Islands have entered into force, he said while addressing 8th International Tax Conference organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

TIEAs have also been signed with Cayman Islands, Jersey, Monoco, Saint Kitts and Nevis, Argentina, Costa Rica, Guernsey, Macau, Liberia, Marshal Islands, Congo and Gibraltar. “India is also playing a major role in international forums in the global crusade against black money,” said Joshi.

It is the vice-chair of peer review group of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The country has joined the Financial Action Task Force, the Task Force on Financial Integrity and Economic Development, and the Eurasia Group.

Joshi said a dedicated computerised cell for exchange of information is being created in the CBDT’s Foreign Tax and Tax Research Division.

”This coupled with the fact that negotiations have been completed with 56 jurisdictions in the past two years for having Double Taxation Avoidance Agreements and TIEAs as per international standards – including exchange of banking information and information without domestic interest – will enable us to combat evasion and avoidance of taxes.”

Authorities have developed a toolbox of counter-measures following international standards to discourage transactions by a resident tax-payer with persons located in any country or territory outside India which does not effectively exchange information with India as an anti-avoidance measure.

For this purpose, section 94A has been inserted into the Income Tax Act through Finance Act 2011. This enables the central government to notify any country or territory outside India and transactions with their residents subject to higher withholdings, certain disallowances and transactions subject to transfer pricing regulations.

“The whole world is rapidly becoming a unified society where we see people, corporates, capital and technology moving across political boundaries,” said Joshi. “People everywhere – and that is inclusive of India – today know more about rest of the world. “This raises their expectations for providing better tax-payer services. Citizens have a right to demand better services.”

But the tax department has to take necessary steps to prevent tax evasion and avoidance to ensure that resources are available to the government for development activities and honest tax-payers are not disproportionately burdened.

Meanwhile, Member of Parliament and ASSOCHAM president elect R.N. Dhoot said India needs to follow sound fiscal policies at a time of economic recession worldwide. With new business models emerging, the tax regime needs to be simplified so that more revenue collections can be used to propel socio-economic growth.

Dhoot said the chamber has launched a national campaign to spread awareness on complex taxation issues. So far, 30 conferences have been organised in various states.

M. Lakshminarayanan, chairman of ASSOCHAM National Council on International Taxation, said the Direct Taxes Code (DTC) likely to be implemented next year will remove several ambiguities and bring in provisions like the General Anti-Avoidance Rules and the Controlled Foreign Corporation Rules.

Transfer pricing regulations are still evolving while the advance pricing agreement is expected to provide certainty, he said.

ASSOCHAM secretary general D.S. Rawat said the purpose of replacing the current tax law with a contemporary legislation in the form of a unified tax code is to align with economic needs and keep abreast with business needs.

A major area of reform that DTC needs to incorporate is accountability in tax administration, he said. “It is heartening that the government has been receptive to ASSOCHAM representations and the concerns will be ironed out in the enacted tax code,” he said.