India's
avidity for exchange of information
In this
era of digitalisation where the world has become a global village and distances
are no longer a challenge, flow of capital has become easier and faster.
Albeit, this globalisation fuelled by technological advancement has led to
seamless transfer of goods, services, money and man, the same has also
stimulated international tax evasion and avoidance, in particular through tax
havens and non-co-operative jurisdictions.
Where
the world has recently witnessed the illegitimate stashing of money in foreign
jurisdictions and banking scandals, co-operation between tax administrations of
different sovereigns has been considered to be critical in this fight against
tax-evasion and in protecting the integrity of tax systems.
A key
aspect of such co-operation shall be the effective and seamless exchange ofinformation ('EOI'), between the jurisdictions, to curb the practice of
tax evasion followed by taxpayers around world.
The
1998 OECD report 'Harmful Tax
Competition: An Emerging Global Issue'1 identified the lack of effective exchange information as
one of the key characteristics of harmful tax practices and recommended member
countries to remove impediments to the access of bank information.
The
scope of national tax authorities is restricted to the territorial limitations
of the country and hence their powers are also restricted. Thus international
co-operation and mutual assistance for tax purposes is most important which
makes exchange of information an effective worldwide system for recovery of
taxes in cross-border scenarios.
The G20
leaders stated their commitment to the automatic exchange of information and
called for a new single global standard (Multilateral Convention on Mutual
Administrative Assistance on Tax Matters) for automatic exchange of
Information. Many countries namely Austria, Luxemburg, Singapore, Switzerland
etc have signed the Multilateral Convention on Mutual Administrative Assistance
in Tax Matter designed by Organisation for Economic Co-operation and
Development ('OECD'), which inter alia, allowed for exchange of
information on request.
India
has also signed the aforesaid Multilateral Convention on June 3, 2015.
United
States of America ('US') has introduced Foreign Accounts Tax Compliance
Act ('FATCA'), a per se unilateral action of the US government
to combat the menace of undisclosed money and wealth of US persons2 stashed in foreign jurisdictions. FATCA at the outset is
an attempt of US to fight against the instances of tax evasion by US taxpayers
through concealment of their direct or indirect interest in offshore financial
accounts and assets.
Click
here to Know More at http://bit.ly/AgreementonFATCA
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