Black money stashed abroad, first list of 627 and now more names

Lalit Shastri

dollarsThe Indian Express today has published a list of names and amount deposited in their accounts in HSBC bank in Switzerland with the heading “The List: Who’s Who & How Much.”

In October 2013, the central government had disclosed to Supreme Court names of three people, including a prominent industrialist, who were holding bank accounts in foreign countries and were under the lens of Income Tax authorities.

Earlier in May 2014, the government had disclosed 18 names associated with 12 trusts holding account in LGT Bank in Liechtenstein that were received by it March 2009 from the German tax authorities.

These accounts are now being investigated by a Special Investigation team (SIT) on directions of the Apex Court. The Special Investigation Team (SIT), headed by Justice M.B. Shah, with Justice Arijit Pasayat as vice chair, was officially notified by the government end-May2014. The details of these accounts were secured from the French government. India’s Attorney General Mukul Rohatgi, last year submitted a sealed envelope containing the list of overseas bank account holders to a bench of Chief Justice H.L. Dattu, and Justices Ranjana Prakash Desai and Justice Madan B. Lokur. He had told the court that the data was actually stolen by a bank employee, as a result of which the Swiss authorities had refused to extend any help.

The Income Tax Act has been amended to extend the limitation period for recovering taxes up to March 31, 2015. This one amendment provides a blanket shield and insulates from punitive action the “tax evaders” or those who have indulged in money laundering by opening overseas bank accounts.

Under the earlier provision, the limitation period of six years came to an end in 2012 for recovery of taxes in the case of the 627 Indians holding accounts at HSBC Bank in Geneva, whose names were given in a sealed envelope to Supreme Court last year by the Union Government.

With the latest disclosure now, the HSBC Indian list has doubled to 1195 names, including those of some prominent businessmen and politcians.

When a senior Income Tax department officer was contacted, he said: “under the Income Tax Act, all assessments (for the current financial year) are to completed by March 31, 2015. Even in the case of those whose names have been provided to the Supreme Court by the Government, there is no such thing as a fast track as the deadline for assessing their income under the Income Tax Act is March 31, 2015.” The amendment in the Act for extending the limit for recovery of taxes would come to their rescue and even if anyone admits at this stage and props up evidence to establish legal income to justify the foreign bank accounts, he or she would be able to go scot free by paying the tax arrears.

It is also being pointed out that what has been shared with the Supreme Court is not even the tip of the ice-berg when it comes to the problem of black money since the list of 627, nearly half of them non-resident Indians, relates to accounts in just one Swiss bank. what about bank accounts in other offshore tax havens and financial centres, many of which are located in tax havens recognized for extending highly favourable advantages. Mauritius is a typical case in point. The Indo-Mauritius DTAA, which was first signed in 1983, provides that no resident of Mauritius would be taxed in India on capital gains arising out of sale of securities in India. The India-Singapore Double Tax Avoidance Treaty has got virtually similar provisions, but tax exemption is only for few selected businesses

The U.S. National Bureau of Economic Research has suggested that roughly 15% of the countries in the world are tax havens, that these countries tend to be small and affluent, and that better governed and regulated countries are more likely to become tax havens. Switzerland for one has long remained a tax haven. Luxembourg is primarily a conduit tax haven and there are also other sovereign countries that have such low tax rates and lax regulation that they can be considered semi-tax havens. Then there are also non-sovereign jurisdictions commonly labelled as tax havens. They include Isle of Man, British Overseas Territory, Bermuda, British Virgin Islands, and Cayman Islands.

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