1. Naming account holders was under court direction, India tells Germany

Naming account holders was under court direction, India tells Germany

India is now discussing new double tax avoidance agreements with eight nations.

By: | Published: November 3, 2014 5:46 AM

The government of India has told its German counterpart that it was acting under a Supreme Court order when it submitted sealed envelopes in April listing the names received from the European nation of 26 Indians with foreign bank accounts, including eight who have not evaded taxes.

The finance ministry is now preparing a detailed explanation to Germany about the circumstances that led to the names of eight genuine account holders eventually reaching the public domain. After the ministry gave the names of Indian account holders in LGT Bank, Liechtenstein, in sealed envelopes to the court, it ordered the authorities to share the same with Ram Jethmalani, the petitioner who led a campaign to access it.

Germany then asked for a comprehensive explanation for the legal basis of the disclosure as the tax treaty between the nations allow sharing of information received under it only as part of court proceedings meant to establish wrongdoing by the account holders. A detailed clarification will be sent to Germany in a few weeks, sources said.

The ministry is immensely relieved the apex court chose not to open the sealed envelopes given to it last week as directed, listing 627 names of account holders in HSBC, Geneva, obtained from French authorities as opening it would have provoked similar queries from Paris. The court only passed it on to the special investigation team probing into the issue of unaccounted wealth held by Indians in overseas banks. “Had the court opened those sealed covers, we would have had several more questions to answer,” said a person privy to the government’s thinking.

While there is a view within a section of the government that the liberty to disclose data received from tax treaty partners in public court proceedings will also cover proceedings unrelated to prosecution of the alleged tax evaders, the ministries involved in negotiations with foreign authorities do not agree. “We commit to follow only the international standards of confidentiality of information received under a treaty, not the practices or interpretation adopted by any other individual country. We cannot, therefore, expect others to accept any liberal interpretation we may think of,” said the person.

India is now discussing new double tax avoidance agreements (which contain information sharing and confidentiality clauses) with eight nations and tax information exchange agreements (TIEA) with 30 others. New Delhi has already signed 93 DTAAs and 16 TIEAs. The standard commitment under treaties allow disclosure of details received only as part of tax court proceedings, said the person.

Govt awaits SC clarification

The SC is yet to give a clarification to the government on whether it can sign new tax treaties with the confidentiality clause that is a global standard. India has a December 31 deadline for signing a banking information sharing deal with the US under that country’s Foreign Account Tax Compliance Act (FATCA) that seeks to prevent tax evasion by Americans using foreign bank accounts. India would also get information under this pact about Indians having accounts in US financial institutions that are not disclosed to the Income Tax Department here. US allows an option for banks in countries that do not sign such a pact with it at the government level to directly give banking information to the US IRS and avoid 30% penal withholding tax on receipts from US institutions. However, to exercise that option, the governments have to agree on that as well. The understanding so far reached between India and the US is only for state level information sharing. “The advantage of information exchange at government level is that India too will get details of its citizens’ undisclosed foreign accounts on a reciprocal basis. That benefit would not be there if banks are allowed to individually share information with the IRS,” said another person in the know of talks.

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Tags: HSBC Bank
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