Absence of criminal legal treaties between India and tax haven nations have been cited by probe agencies working in the SIT on black money as one of the major impediments in initiating steps to bring back illegal funds stashed abroad by Indians.
These agencies, including the Central Board of Direct Taxes (CBDT), CBI and the Enforcement Directorate, have made these challenges known to the SIT in a report after which the high-powered panel has begun preparing an action plan to be communicated to the government for action in this regard, official sources said.
The report, accessed by PTI, says at present India has 37 Mutual Legal Assistance Treaties or Multilateral Assistance Treaties with about 37 countries which does not include “many of the tax havens like Cayman Islands, Guernsey, Lichtenstein, Monaco, Bermuda, Malta, British Virgin Islands and others” where a number of suspect black money probes are being conducted by Indian investigative agencies.
“The Special Investigation Team on black money is expected to soon send a report to the government in this regard with a request to ink MLATs with tax haven nations and all other jurisdictions important from the point of financial and tax evasion investigations,” sources privy to the development said.
To impress upon the difficulty faced by agencies the report cited two incidents of last year, where tax sleuths were not able to “attach and recover the money in foreign bank accounts in the UK and Singapore through the Ministry of Home Affairs and CBI” as the existing treaties like Double Taxation Avoidance Agreement (DTAA), Tax Information Exchange Treaty (TIEA) and those framed by global economic body OECD were not helpful.
These treaties, sources said, provide for only collection of documents and do help in attachment or restraint of funds or assets of a suspect black money holder to India.
“Thus, in a number of black money cases the Indian agencies are not being able to recover or repatriate these funds lying in foreign countries or bank accounts abroad for recovery of tax demands under domestic laws,” they said. When such cases are under investigation there is no tax demand raised on them or penalty notices issued by a court and hence Indian agencies are not able to lay their hands on such suspected offenders.
“The MLAT does not need this. If there is convincing proof, Indian agencies can block these funds or accounts easily,” they said.
The report also said “most of the tax haven countries– where most of the foreign funds of Indians are reported or alleged to be stashed– have not ratified or brought into force the Multilateral Convention of the Organisation for Economic Cooperation and Development (OECD).”
Hence, this instrument is also not helpful for India in such cases even as the clamour to get back black money is being made for long now, they said.
“The SIT has been appraised about these developments and diplomatic channels will be activated to get the ratification of OECD framed treaties done by these countries on-board the model global convention,” they said.
The SIT has been constituted by the Supreme Court and notified by the government with a specific purpose to unearth black money, curb its menace, strengthen mechanisms to check it and investigate all such cases where Indians have stashed illegal funds or assets overseas.
The panel, headed by retd Supreme Court judge M B Shah with justice (retd) Arijit Pasayat as its Vice-Chairman, has heads or officers of 11 central investigative and enforcement agencies on its board.