To trace illegal funds of Indians stashed abroad, the government will soon initiate an exercise to revise tax agreements with a host of countries, including Australia and South Africa, and faciliate exchange of banking and other tax-related information with them.
This follows the recent decision of Mauritius to exchange banking information with India under the tax treaty between the two countries.
The finance ministry has drafted a note for this and it will soon be sent to the Cabinet for approval, a government source privy to the development said.
The bolstering of the double taxation avoidance agreements (DTAA) is proposed with Australia, Bhutan, Chile, Estonia, Romania and South Africa. In 2010-11 cabinet approvals were obtained for 14 new and revised DTAAs, including Switzerland, Singapore and Norway.
DTAAs have been amended (clause on banking sector has been inserted) with 40 nations because in absence of a clause on banking sector in DTAAs, the contracting countries were not sharing information in this regard. However, after the G20 Summit in Pittsburgh in 2009 and subsequent meetings of Finance Ministers of the member countries, all the 20 countries agreed to amend DTAAs.
India has signed Amending Protocol with Switzerland and it is ready to seal a similar agreement with Singapore. Mauritius has also sent a communication to India promising exchange of banking information under the existing treaty.
Besides, India has completed negotiations with tax havens Costa Rica, Guernsey, Liberia, Macao and Marshall Islands for signing Tax Information Exchange Agreements (TIEAs). While note for Marshall Islands is ready to be sent to the cabinet, it is under circulation for Costa Rica, Guernsey, Liberia and Macao, another source said.
In 2010-11, India has signed TIEAs with five tax havens ? Bermuda, Bahamas, British Virgins Islands, Cayman Islands and Isle of Man. By help of TIEA, India can obtain past information in criminal cases?tax evasion leading to prosecution?as well as well as proposal for tax examination abroad. To obtain seamless flow of information on tax and investment made by individuals and institutions, 10 income tax overseas units have been created to assist Indian authorities in their work. ?Two units at Mauritius and Singapore are already in operational and for remaining 8, selection of officers has been made and approval from MEA is awaited,? an official said.