Govt panel to suggest ways to tax black money kept abroad

The Government panel set up to estimate the quantum of black money will suggest ways to tax unaccounted money kept abroad.

This was disclosed by the Finance Ministry on Wednesday in an 18-page additional affidavit filed before the Supreme Court.

The panel — comprising the National Institute of Public Finance and Policy, the National Institute of Financial Management and the National Council for Applied Economic Research — has already been told to seek inputs from the concerned departments and stakeholders and submit its report expeditiously.

The affidavit, filed in response to a Public Interest Litigation filed by eminent jurist Mr Ram Jethmalani and others seeking retrieval of black money from abroad — spelt out the seven-point terms of reference for the panel.

They include: (i) assess/survey unaccounted income and wealth in India and abroad; (ii) profile activities engendering money laundering in India and overseas with its ramifications on national security; (iii) identify sectors in which unaccounted money is generated and examine causes that result in generation of such money; (iv) examine methods employed in generation of unaccounted money and its conversion into accounted money; (v) suggest ways to detect and prevent black money and bring it back into the mainstream of the economy; (vi) suggest methods to tax unaccounted money kept outside India; (vii) estimate quantum of non-payment of tax due to evasion by registered corporate bodies.

The Government also said it has proposed new provisions to unearth and tax black money in the Direct Taxes Code (DTC) Bill.

The provisions include a new definition of a taxable asset as inclusive of deposits in banks located abroad in case of individuals and such bank deposits not recorded in the account books in case of others, in addition to interest in a foreign trust or any other entity (other than a foreign company) and any equity held in a ‘Controlled Foreign Company' (CFC).

The DTC Bill also proposes to make it a mandatory reporting requirement for every resident assessee to furnish details of their investment and interest in any entity outside India.

The Government submitted that in view of the stringent measures required to deal with undisclosed foreign bank accounts and cross-border transactions, the Central Board of Direct Taxes has asked the Income Tax authorities that in specified categories of cases, prosecution proceedings may be initiated soon after completing the assessment or reassessment.

“It is submitted that once prosecution is launched in such cases, the information will be available for use by other law enforcement agencies and will also become available in the public domain,” it said.

Further, the General Anti-Avoidance Rules (GAAR) have been proposed to deal with aggressive tax planning devices used to circumvent the tax laws. The CFC rules have been incorporated to tax passive income earned by residents from substantial shareholding in companies located in low tax jurisdictions.

The Government also said Cabinet approval has been granted for entering into Tax Information Exchange Agreements with eight of the 10 countries with whom negotiations have been completed. The 10 include the Bahamans, Bermuda, the British Virgin Islands, the Isle of Man, the Cayman Islands, Jersey, Monaco, St Kitts and Nevis, Argentina and the Marshall Islands.

Besides, the Centre said it has initiated the process of negotiations with 65 countries to amend the existing Double Taxation Avoidance Agreement (DTAA) and broaden the scope of the Exchange of Information (EOI). A dedicated EOI Unit with direct access power is being created to ensure that the work of exchange of information is effectively carried out, it said. India has also already initiated the process of negotiation for relaxation of the confidentiality provision under DTAA with its treaty partners.

In addition, the Government said the Committee looking into the revision of transfer pricing norms submitted its first report last month and will submit its second and final report by next month.

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