- India participated in the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) meeting held recently in Paris where 30 Revenue Authorities shared their findings on investigations arising from the Panama Papers.
- The meeting included sharing of best practices and information between participating member countries based on legal instruments under the tax treaties and OECD and Council of Europe Multilateral Convention.
- The sharing of this information within a group of this size is unique and sets the basis for greater cooperation amongst tax administrations.
About Joint International Task force on Shared Intelligence and Collaboration:
- The JITSIC brings together 36 of the world’s national tax administrations that have committed to more effective and efficient ways to deal with tax avoidance. It offers a platform to enable its members to actively collaborate within the legal framework of effective bilateral and multilateral conventions and tax information exchange agreements – sharing their experience, resources and expertise to tackle the issues they face in common.
- Open to all members of the OECD’s Forum on Tax Administration (FTA), the JITSIC operates through a Single Point of Contact (SPOC) in each country. It is supported by the FTA Secretariat based at the OECD.
- JITSIC was originally established in 2004 as the Joint International Tax Shelter Information Centre to combat cross-border tax avoidance. Building on its initial achievements, the JITSIC was re-established in 2014 with many new members from across the FTA.
About Panama paper leak:
- In the month of April, Panama paper leaks took the world by storm. These leaks are related to the parking of money by global powerful and rich personalities in a tax haven country, Panama, in order to avoid or evade tax. This information regarding the leaks comes out in open after an anonymous source contacted the German newspaper Süddeutsche Zeitung (SZ) about a year ago and submitted encrypted internal documents from Mossack Fonseca, a Panamanian law firm that sells anonymous offshore companies around the world.
Panama paper leaks and India
- The papers show that some Indians have set up offshore entities through the Panama law firm. Some of them floated offshore entities at a time when laws did not allow them to do so; some have taken a technically convenient view that companies acquired is not the same as companies incorporated; some have bunched their annual quota of remittances to subscribe to shares in an offshore entity acquired at an earlier date. Still, some others have received income earned abroad and deposited it in the entity to avoid tax. Some have opened a bank account to keep payoffs in government contracts, or held “proceeds of crime” or property bought with money made illegally in Trusts/ Foundations.
- In India there is a lack of clarity persists about the legality of buying offshore companies. The lack of clarity exists despite the Reserve Bank of India’s evolving guidelines on offshore remittances and investments since 2004. While the guidelines, such as those of the Liberalised Remittance Scheme, are specific to remittances utilised by residents to service various overseas requirements such as medical treatment and education, they have been modified over time to permit the setting up of 100 per cent subsidiaries and joint ventures within the limit of $250,000 a year. The RBI guidelines have largely been a reactive measure to address flows to tax havens.
- But non-disclosure of an overseas asset is the possible violation of Foreign Exchange Management Act, the Prevention of Money Laundering Act, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, the Prevention of Corruption Act and the Income-Tax Act.