The government will soon have its tax sleuths posted in at least eight more overseas units like in the US and Britain for exchange of tax-related information, finance minister Pranab Mukherjee said on Wednesday. The move would help fight tax evasion and avoidance by way of routing investments in India through other countries or even track illegal funds parked outside India.
The government has one such unit (ITOUs) each at the Indian mission in Singapore and Mauritius. Eight more such units in the US, the UK, the Netherlands, Japan, Cyprus, Germany, France and the UAE are also being created on similar lines, Mukherjee said at the annual conference of the Chief Commissioners and Directors General of Income Tax.
?I am hopeful that these measures would result in seamless flow of tax related information from foreign tax jurisdictions and would strengthen our fight against the menace of tax evasion using cross border transactions,? he said. Globalisation has thrown up new and complex challenges such as the development of tax shelter products and use of tax havens. Round tripping and treaty shopping are some issues that are being faced by the revenue department with regard to international tax cases. While, Mukherjee also expressed concern over the increase in the number of litigation with taxpayers and the revenue locked in appeals. Strengthening of the Settlement Commission and setting up a Dispute Resolution Panel may help to some extent, he said.
In a positive development mutual agreement procedure (MAP) negotiations under the Indo-US DTAA had led to a tax demand of Rs 800 crore in 48 cases that have been confirmed, he said, adding tax payers should be encouraged to invoke MAP as it has emerged as a preferred alternate dispute resolution mechanism. MAP is an agreement done in advance between two parties for pricing of goods and services when sold from one country to another. Meanwhile, with regard to the Direct Taxes Code (DTC) that is aimed at replacing the archaic Income Tax Act 1961, he said all stakeholder concerns linked to the code will be addressed in the revised draft that would be out shortly. However, senior officials from the CBDT have said that the revised DTC draft may come next month with huge work within the ministry still pending.