India on Wednesday made out a strong case for a global crusade against black money with Finance Minister Pranab Mukherjee stating that the annual illicit outflows from emerging economies and developing countries average a phenomenal $725 billion to $810 billion.
Mukherjee quoted the estimate from the global financial integrity report to drive home his point at the international conference on tax and inequality.
"The opacity of tax systems in some of the jurisdictions is adding to the challenges. There has been some movement on these issues in response to the initiative by the G-20. We need to pursue this to its logical end," he said.
The minister said tax evasion undermines the intended benefits of a progressive tax policy and resolving these issues requires international cooperation and alignment of tax systems for better cross- border compliance.
The government has adopted a five-pronged strategy to deal with the issues of tax evasion and black money, Mukherjee said.
The strategy includes joining the global crusade against black money and creation of a legislative and institutional framework to deal with illicit money.
Although the strategy has started showing results, the complexity of cross-border transactions is on the rise and presents a serious challenge to tax administrators in practicing and bringing equality, Mukherjee said.
"About 10 countries have provided us automatic information and action is being initiated," finance secretary RS Gujral told journalists on the sidelines of the conference.
"Yes, it does include banking information," he said, when asked whether the information was about secret bank accounts.
India is playing an important role at international fora in highlighting the importance of exchange of banking information and sharing of past data, he added.
He said the efforts would take some time to yield results. The next five years would show how well the exchange of banking information will address the question of black money being siphoned off abroad, he added.
He also disclosed that the government has obtained certain information from Mauritius regarding individual cases which "we have asked for and obviously action is being taken on them". The real issue with Mauritius was with regard to capital gains tax, he said. India is in the process of revising the tax treaty with the island nation.
"We are seeking to amend 75 of our DTAAs (double taxation avoidance agreements) and we are seeking to enter into 17 TIEAs (tax information exchange agreements)," Gujral said.
However, he expressed disappointment over the fact that some countries were still not willing to share past information and agreeing for automatic exchange of information, despite Organisation for Economic Co- operation and Development (OECD) guidelines on the issue.
On the domestic front, the finance minister said he hoped that the Direct Taxes Code (DTC), which seeks to modernise tax laws in the country, will come into force from April 1, 2012.
Mukherjee said India has been pursuing tax reforms in a gradual manner.
He said they are aimed at rationalisation of tax rates, broadening of the tax base, focusing on sunrise areas like transfer pricing and international taxation and strengthening of the tax information exchange network.
Courtesy: Mail Today