Govt ‘strategises’ on black money but won’t reveal names of tax evaders

Under attack from the Supreme Court and the Opposition over stashing of large amount of money in Swiss banks and other tax havens, the government on Tuesday revealed that it is working on a five-pronged strategy to tackle the issue.

New Delhi: Unfazed by opposition attacks and questions from Supreme Court, Government today maintained that it cannot disclose information received from foreign entities on black money held by Indians abroad because of absence of legal framework.
Finance Minister Pranab Mukherjee, however, dismissed opposition criticism that it was not disclosing information because such disclosure could result in the government's fall.
"Let us understand the issue. No information can be made available unless there is a legal framework.
No sovereign country is going to share information unless there is a legal framework," he told a press conference explaining the reasons why the government was not in a position to part with information it has obtained some foreign entities on black money stashed away abroad.
However, he said Double Taxation Avoidance Agreement (DTAA) and Exchange of Taxation Information Agreement are two instrumentalities under which information can obtained and the government has already amended pacts with 23 countries to get information from banks.
"But the problem is information which we have obtained has come under some conditions of secrecy. Today, if we disclose tomorrow other countries will not give me the information raising an accusing finger that you do not meet international commitments," he said.
However, Mukherjee said "there is a way. As and when the Income Tax Authorities will be in a position to prosecute cases against tax evaders you will come to know".
"Even I have no intention or authority of knowing the names (of those who have stashed black money abroad). The Income Tax officers have statutory powers under which they perform their duties and they are outside the purview of the administrative control of the ministry," Mukherjee said.
Mukherjee said the government has formulated a five pronged strategy comprising joining the global crusade against 'black money'; creating an appropriate legislative framework; setting up institutions for dealing with illicit funds; developing systems for implementation; and imparting skills to the manpower for effective action.
The Finance Minister said there were no reliable estimates of black money both inside and outside the country.
The interim recommendations of BJP Task Force 2009 have estimated the amount of black money to be between USD 500 billion to USD 1,400 billion, he said.
A recent study by Global Financial Integrity has estimated the present value of illicit money outflow to be USD 462 billion, he said.
"All these estimates are based on various unverifiable assumptions and approximations. Government has been seized to the matter and has constituted a multidisciplinary committee to get studies conducted to estimate the quantum of illicit fund generated by Indian citizens," Mukherjee said.
On whether the government would come out with an amnesty scheme to bring back unaccounted money abroad, he said a group has been constituted to look into such possibility.
He said India has also initiated process of negotiation with 65 countries to broaden the scope of article concerning Exchange of Information to specifically allow for exchange of banking information and information regarding taxpayers not covered by DTAA.
"Thirteen new DTAAs have also been finalised where the Exchange of Information Article is in line with the international standards," the minister said.
He said the government was strengthening the administrative machinery by setting up eight more income tax overseas units.
Two such units are operational in Singapore and Mauritius, Mukherjee said.
Government is also setting up an Exchange of Information (EoI) Cell, which will help in effective exchange of information to curb tax evasion, he said.
"We have detected undisclosed income of about Rs 15,000 crore in last 18 months, due to focused search operations by the Income Tax Department," he said adding that during the same period, Directorate of International Taxation has collected taxes of Rs 34,601 crore.
"The Directorate of Transfer Pricing has detected mispricing of Rs 33,784 crore, which has prevented shifting of an equivalent amount of money outside India," he said.
Information regarding details of payments received by Indian citizens in several countries has started also coming from treaty partners. This information is in different stages of processing and investigation, Mukherjee said.
The Finance Minister said necessary provisions have been made in the proposed Direct Tax Code to create legislative framework to check illicit outflows of funds.
India's membership in Financial Action Task Force in June last year, was in recognition of the strength of the country's anti-money laundering and anti-tax evasion measures.
India has also joined the Task Force on Financial Integrity and Economic Development in order to bring greater transparency and accountability in the financial system.
In June 2009, the Prevention of Money Laundering Act (PMLA) has been amended whereby the predicate offences listed in the Schedule to the Act were substantially increased in terms of the Acts covered and sections covered under such Acts, Mukherjee said.
He said this amendment has tremendously widened the scope of money laundering investigations by the Directorate.
Mukherjee said the early results of the government's initiatives were encouraging.
"These proactive steps led to additional collection of taxes of Rs 34,601 crore and detection of additional income of Rs 48,784 crore on which taxes are being collected. I am confident that the results will be quite satisfactory in the days to come," Mukherjee said.

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