Sharing of information of Black Money by Foreign Countries

While there is no official estimation regarding black money of Indians stacked in Swiss banks, recent media reports have quoted Zurich based Swiss National Bank as saying that money held by Indians in Swiss banks has fallen by nearly one-third. These reports also say that the funds, described by Swiss National Bank as ‘liabilities’ of Swiss banks or ‘amounts due to’ their clients, are the official figures disclosed by the Swiss authorities and do not indicate to the quantum of alleged black money held by Indians in Switzerland.Under the provisions of direct taxes laws, the Government has entered into tax treaties with a number of countries/ jurisdictions which obliges them to provide information for tax purposes. These tax treaties are – (i) Double Taxation Avoidance Agreements (DTAAs), (ii) Tax Information Exchange Agreements (TIEAs), (iii) Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention), (iv) SAARC Multilateral Agreement. India has tax treaties with 139 countries/jurisdictions as on 30.06.2016. The names of such countries/jurisdictions is as follows:Afghanistan, Albania, Andorra, Anguilla, Argentina, Armenia, Aruba, Australia, Austria, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Belize, Bermuda, Bhutan, Botswana, Brazil, British Virgin Islands, Bulgaria, Canada, Cameroon, Cayman Islands, China, Chinese Taipei (Taiwan), Chile, Colombia, Costa Rica, Croatia, Curacao, Cyprus, Czech Republic, Denmark, Egypt (United Arab Republic), El Salvador, Estonia, Ethiopia, Faroe Islands, Fiji, Finland, France, Gabon, Georgia, Germany, Ghana, Gibraltar, Green Land, Greece, Guatemala, Guernsey, Hungary, Iceland, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Jordan, Kazakhstan, Kenya, Korea (Republic of), Kuwait, Kyrgyz Republic, Latvia, Liechtenstein, Liberia, Libya, Lithuania, Luxembourg, Macau (China), Macedonia, Malaysia, Maldives, Malta, Marshall Island, Mauritius, Mexico, Moldova, Monaco, Mongolia, Montenegro, Montserrat, Morocco, Mozambique, Myanmar, Namibia, Nepal, Netherlands, New Zealand, Nigeria, Niue, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saint Kitts and Nevis, Saudi Arabia, Senegal, Serbia, Seychelles, Singapore, Sent Maarten, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syria, Tanzania, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Turks & Caicos, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Vietnam & Zambia.Besides the above, the Common Reporting Standards (CRS), developed in response to the G20 request and approved by the OECD Council, calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. A key element of successful implementation of CRS is putting in place an international framework that allows automatic exchange of CRS information between jurisdictions. This framework is known as CRS Multilateral Competent Authority Agreement (MCAA). While over 100 jurisdictions have committed to exchanging information under the CRS, 83 jurisdictions have signed the MCAA till June 2016.Appropriate action against tax evasion including in respect of unaccounted income stashed in foreign countries, is an on-going process. Such action under direct tax laws includes searches, surveys, enquiries, assessment of income, levy of taxes, penalties, etc. and filing of prosecution complaints in criminal courts, wherever applicable.Recognizing various limitations under the existing legislation [Income-tax Act, 1961, etc.], the Government enacted a new law – ‘The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’ – to specifically and effectively tackle the issue of black money stashed away abroad. This has, inter alia, provided for more stringent provisions of penalties and prosecutions in respect of black money stashed away abroad. Further, under this law, for the first time the offence of willful attempt to evade tax, etc. in relation to undisclosed foreign income/assets has been made a Scheduled Offence for the purposes of the Prevention of Money-laundering Act, 2002 (PMLA). This enables attachment and confiscation of the proceeds of crime of willful attempt to evade such tax, etc., eventually leading to recovery of such undisclosed foreign income and assets/black money stashed away abroad. The new law came into force w.e.f. 01.07.2015. Thus, the first assessment year (A.Y.) in respect of the new law is A.Y. 2016-17 which began only on 01.04.2016.However, before the cases involving black money stashed away abroad were subjected to more stringent provisions of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, a one-time three months’ compliance window closing on 30th September 2015 was...

Sharing of information of Black Money by Foreign Countries

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