Initiatives taken by the Investigation Division of Central Board of Direct Taxes (CBDT) for unearthing black money :
I. The Government of India has commissioned a study on unaccounted income/ wealth both inside and outside the country bringing out the nature of activities engendering money laundering and its ramifications on national security. The study is being conducted by three national institutes viz. National Council of Applied Economic Research (NCAER), National Institute of Public Finance & Policy (NIPFP) and National Institute of Financial Management (NIFM), with inputs from various ministries/departments. The study will be completed by the end of 2012.
II. A Directorate of Criminal Investigation (DCI) has been created as an attached office of the Central Board of Direct Taxes (CBDT) to track financial transactions relating to illegal / criminal activities, including illicit cross-border transactions, from the direct tax angle and bring such activities to justice. Creation of DCI is also in line with FATF recommendations to exclusively deal with tax crimes, including direct taxes.
III. CBDT is coordinating with the Election Commission of India (ECI) for controlling political expenditure and verification of affidavits filed by candidates of political parties.
IV. In order to strengthen the existing laws relating to black money, the Government constituted a Committee under the Chairman, CBDT to examine the measures to strengthen the existing legal and administrative framework to deal with the menace of generation of black money through illegal means including, inter alia,
a) Declaring wealth generated illegally as national asset;
b) Enacting / amending laws to confiscate and recover such assets; and
c) Providing for exemplary punishment against its perpetrators.
The Committee submitted its report to the Government on 29th March 2012. The report has been sent to different Ministries / Organisations and State Governments for necessary action.
V. Information received under DTAA – Information from Germany & France has been investigated. Tax evasion of more than Rs.600 crore detected and taxes of Rs.200 crore has already been realized. Prosecution proceedings have been launched in 17 cases pertaining to LGT Bank accounts. Assessment proceedings have been initiated in cases relating to HSBC accounts. Further information from outside the country is awaited in several cases. Information received from different countries under the automatic exchange of information arrangement is appropriately utilized for the purpose of investigation and assessment.
VI. Search & Seizure, Surveys – In the last three financial years, the Investigation wing of the CBDT has detected undisclosed income of over Rs.32,000 crore besides seizing undisclosed assets valued at over Rs.2,600 crore. The Income Tax Department (ITD) has further detected undisclosed income of Rs.17,325 crore in surveys conducted at business premises.
VII. Tax Prosecutions – Out of 1,548 prosecution cases disposed of during the last three financial years, the ITD has obtained conviction in 97 cases besides fiscal compounding in 771 cases of admitted tax evasion, leading to a success rate of 56.1 percent.
Beside above, the Government has also taken the following steps to deal with the problem of Black Money under a five pronged strategy in last 3 years:
1. Creating an appropriate Legislative Framework
· In 2009, we had 78 Double Taxation Avoidance Agreements (DTAAs) in force. 75 of these DTAAs did not have specific provisions for exchange of banking information and information without domestic interest. Renegotiation of these DTAAs was started to broaden the scope of Article concerning Exchange of Information. Till date we have completed renegotiation in 29 cases; and renegotiation in remaining cases are under progress. In addition we have finalised negotiation of 19 new DTAAs and 17 new Tax Information Exchange Agreements (TIEAs). It may be clarified that as on today we have 84 DTAAs. TIEAs are concluded with countries with which we do not want to have DTAAs at this stage. Further, FM has approved negotiations for TIEAs with 25 countries/jurisdictions on 31st December, 2011. Hence, as on date, we have completed negotiation with 65 countries/jurisdictions (29 existing DTAA, 19 new DTAAs and 17 TIEAs). 33 treaties (21 DTAAs/ 12 TIEAs) have been signed.
In addition to DTAAs and TIEAs, the Government of India has also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 26 January 2012. These Multilateral Conventions have been ratified which contain provisions for automatic exchange of information, exchange of past information and assistance in collection of tax claims. This has come into force on 1st June, 2012.
NOTE: Status of DTAAs/TIEAs negotiations as on 1st August 2012 is given at the end as Annexure-I.
· Enacted legislation incorporating counter measure against non-cooperative jurisdiction (Section 94 A in Finance Act 2011).
· PMLA was amended on 01.06.2009 to increase list of scheduled offenses.
· Commissioned study to estimate quantum of Black Money both inside and outside the country in March, 2011.
· 30 of our existing 84 DTAA also contain article for assistance in collection of taxes including taking measures of conservancy. Government is trying to have this Article in other treaties as well.
2. Setting-up institutions to deal with illicit funds:
· 8 more Income Tax Overseas Units are being set-up (In addition to existing two overseas units). Proposal has been sent to MEA for setting up 14 more such units.
· Computerized Exchange of Information unit (EOI Unit) has been set up.
· Directorate of criminal investigations has been set up.
3. Developing systems for implementation:
· New policy for deployment of manpower to Directorate of Transfer Pricing and International Taxation is implemented.
· Manpower of FT&TR Division is doubled.
· Directorate of Enforcement is strengthened by creating additional posts.
4. Imparting skills to the manpower for effective action:
· More than 100 officers were imparted specialized training abroad in field of International Taxation and Transfer Pricing in F.Y. 2010-11 and 2011-12.
· High level international seminar on transfer pricing was held in India in month of June 2011.
5. Joining the Global crusade against Black Money:
· Issues of tax evasion, end of banking secrecy, past banking information, automatic Exchange of Information have been raised by India in various G 20 meetings like in London, Paris, Washington, Cannes, etc.
· India is playing a key role in Global Forum on Transfer Pricing and Exchange of Information for tax purpose as Vice Chairman of Peer Review Group.
· In June 2010 India became the 34th member of Financial Action Task Force, responsible for enforcement of anti-money laundering (AML) and combating financing of terrorism (CFT) regime. In December 2010 it became 9thmember of Eurasia group. India has also jointed Task Force on financial integrity and Economic Development.
· India is actively participating in policy groups of OECD and UN on Exchange of Information, International Taxation and Transfer Pricing as observer and member respectively.
· ITD Global Conference was held in India in the month of December, 2011 to discuss ways to address growing inequality due to tax evasion and generation of black money
Result Achieved
(a) Huge network of amended DTAA (84) and TIEA with tax havens (9).
(b) Specific requests made by tax authorities have increased significantly
(c) More than 12,500 pieces of Information regarding details of asset and payments received by Indian citizen in several countries have been obtained which are now under different stages of processing and investigation.
(d) 30,765 pieces of domestic information about suspicious transactions has been obtained by FIU which are under investigation by respective agencies.
(e) Directorate of Transfer Pricing has detected mispricing of Rs. 67,768 crore in last financial year and in the current financial year (Rs 43,531 crore in F.Y. 2011-12). This has prevented shifting of equivalent profit out of the country.
(f) Directorate of International Taxation has collected taxes of Rs. 48,951 crore from cross broader transactions in last two financial years.
(g) Investigation wing of CBDT has detected concealed income of Rs. 19,938 crore in last two financial years. Focused searches have been conducted in a number of cases in the current year on the basis of information received from foreign jurisdictions under the provisions of Double Taxation Avoidance Agreements.
(h) Under the EOI Article of DTAA with France, India has received information regarding Indians having bank accounts in this financial year. In 219 cases, the department has detected undisclosed income totalling Rs 565 crore and taxes amounting to Rs 181 crore has already been realized so far.
6. Appraisal of Indian Efforts by International Organizations:
(a) Mr. Jeffrey Owens, head CTPA, OECD said on 12th December, 2011 that India has made remarkable progress in tackling the issues of tax evasion and illicit money in the last two years by negotiating TIEAs and it should be patient to see their effective implementation. He added that India is playing a major role in G20 deliberations for combating tax evasion, black money and money laundering, which are all correlated, and for better cooperation in tax information exchange. It is also urging other countries to share past information, which is a technical and legal issue.
(b) Mr. Pascal saint Amans, Head of the Global Forum on Tax Transparency, In December, 2011, rated India among the first three, if not the first, in terms of promoting the global standards on transparency, fighting tax evasion and having the international community lining up.
(c) Global Financial Integrity supported India’s stand in G20 Summit in Cannes in November, 2011, on Automatic Exchange of Information becoming part of International Standards.
(d) The Task Force on Financial Integrity and Economic Development in a statement dated 17th October, 2011 stated that India is playing a major role in the global crusade against tax crimes and is rapidly expanding its tax agreement network.
Some of the amendments made through the Finance Act, 2012 to deal with the menace of Black Money and to deter the generation and use of unaccounted money are summarized as under:
(a) Introduction of General Anti Avoidance Rules to counter Aggressive Tax Avoidance Schemes
(b) Introduction of compulsory reporting requirement in case of assets held abroad.
(c) Allowing for reopening of assessment upto 16 years in relation to assets held abroad.
(d) Tax collection at source on purchase in cash of bullion or jewellery in certain cases.
(e) Tax collection at source on trading in coal, lignite and iron ore.
(f) Increasing the onus of proof on closely held companies for funds received from shareholders as well as taxing share premium in excess of fair market value.
(g) Taxation of unexplained money, credits, investments, expenditures etc., at the highest rate of 30 per cent irrespective of the slab of income.
(f) Introduction of a reporting mechanism for assets and bank accounts in a foreign country.
Annexure-I
Status of DTAA/TIEA negotiations as on 1st August 2012 is as follows:
1. Status of old DTAAs
No of countries with whom DTAAs were in force in 2009. | No of countries with whom we are negotiating article allowing for exchange of banking information along with names | No of countries with whom these renegotiations are finalised and signed along with names | No of the countries with which revised agreement signed and entered into force |
Total 78(see the list attached). Out of these, 3 DTAAs already had specific provision for exchange of banking information | Total 75 (In the list of 78 countries, three countries, i.e. Iceland, Tajikistan and Myanmar already have the specific provision and hence, remaining 75 countries were taken up for renegotiation | Negotiation finalized: 29 Armenia, Australia,Bangladesh, Brazil, Finland, France, Indonesia, Kenya, Luxembourg, Malaysia, Malta, Morocco, Nepal, Netherlands, Norway, Poland, Romania, Singapore, Sri Lanka, South Africa, Spain, Sweden, Switzerland, Tanzania, Thailand, UK, UAE, Uzbekistan, Zambia | Signed (11):Australia, Finland, Malaysia, Nepal, Netherlands, Norway, Singapore, Switzerland, Tanzania, UAE and Uzbekistan Entered into force(5): Finland, Luxembourg, Nepal, Singapore, Switzerland |
Status of New DTAAs since 2009
No of countries with whom negotiation for new DTAAs have been completed | No of new DTAAs signed | No of new DTAAs entered into force |
Total 19 Albania, Bhutan, Chile, Croatia, Colombia, Estonia, Ethiopia, Fiji Georgia, Hong Kong, Iran, Latvia, Lithuania, Mexico, Mozambique, Senegal, Taiwan, Uruguay, Venezuela, | Signed(9):Colombia, Estonia, Ethiopia, Georgia, Mexico, Mozambique, Lithuania, Taiwan, Uruguay | Entered into force(6): Estonia, Lithuania, Georgia, Mexico, Mozambique, Taiwan |
2. Total DTAAs in force as on today
It may be clarified that as on today we have 84 DTAAs, 78 above plus six more new DTAAs (with Estonia, Georgia, Lithuania, Mexico, Mozambique and Taiwan)
3. Status of New TIEAs since 2009
No of countries with whom negotiations for TIEAs commenced in 2009 with names | No of countries with whom TIEA negotiations are finalised along with names | No of countries with whom TIEA have been signed along with names |
Total 22 (Argentina, Bahrain, Bermuda, Bahamas, British Virgin Islands, Cayman Islands, Congo, Costa Rica, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Liechtenstein, Macau, Maldives, Marshall Islands, Monaco, Netherland Antilles, Panama, Saint Kitts & Nevis, Seychelles) | Total 17 (Argentina, Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands, Congo, Costa Rica, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Macau, Marshall Islands, Monaco, Saint Kitts & Nevis) | Signed (12):Argentina, Bahamas, Bahrain, Bermuda, British Virgin Islands, Cayman Islands Isle of Man, Guernsey, Jersey, Liberia, Macau and Monaco Entered into force(9): Bahamas, Bermuda, British Virgin Islands, Cayman Islands Isle of Man, Jersey, Guernsey Liberia and Macau |
4. In 2012, negotiations for TIEAs commenced with 25 more countries/jurisdictions as under:
1. Andorra
2. Anguilla
3. Antigua and Barbuda
4. Aruba
5. Barbados
6. Belize
7. Brunei Darussalam
8. Cook Islands
9. Curacao
10. Dominica
11. Dominican Republic
12. Faroe Islands
13. Greenland
14. Grenada
15. Honduras
16. Jamaica
17. Montserrat
18. Peru
19. Saint Lucia
20. Saint Vincent and the Grenadines
21. Samoa
22. San Marino
23. Saint Maarten
24. Turks and Caicos
25. Vanuatu
5. In addition to DTAAs and TIEAs, the Government of India has also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 26 January 2012 which has come into effect on 1stJune, 2012.
6. List of DTAA countries as on 2009 (78)
Sr. No. | Country with which India has DTAA | Whether under renegotiation |
1. | Armenia | Yes |
2. | Australia | Yes |
3. | Austria | Yes |
4. | Bangladesh | Yes |
5. | Belarus | Yes |
6. | Belgium | Yes |
7. | Botswana | Yes |
8. | Brazil | Yes |
9. | Bulgaria | Yes |
10. | Canada | Yes |
11. | China | Yes |
12. | Cyprus | Yes |
13. | Czech Republic | Yes |
14. | Denmark | Yes |
15. | Egypt | Yes |
16. | Finland | Yes |
17. | France | Yes |
18. | Germany | Yes |
19. | Greece | Yes |
20. | Hungary | Yes |
21. | Iceland | Already have provision for exchange of banking information |
22. | Indonesia | Yes |
23. | Ireland | Yes |
24. | Israel | Yes |
25. | Italy | Yes |
26. | Japan | Yes |
27. | Jordon | Yes |
28. | Kazakstan | Yes |
29. | Kenya | Yes, |
30. | Korea | Yes |
31. | Kuwait | Yes |
32. | Kyrgyz Republic | Yes |
33. | Libya | Yes |
34. | Luxembourg | Yes |
35. | Malaysia | Yes |
36. | Malta | Yes |
37. | Mauritius | Yes |
38. | Mongolia | Yes |
39. | Montenegro | Yes |
40. | Morocco | Yes |
41. | Myanmar | Already have provision for exchange of banking information |
42. | Namibia | Yes |
43. | Nepal | Yes |
44. | Netherlands | Yes |
45. | New Zealand | Yes |
46. | Norway | Yes |
47. | Oman | Yes |
48. | Philippines | Yes |
49. | Poland | Yes |
50. | Portuguese Republic | Yes |
51. | Qatar | Yes |
52. | Romania | Yes |
53. | Russia | Yes |
54. | Saudi Arabia | Yes |
55. | Serbia | Yes |
56. | Singapore | Yes |
57. | Slovenia | Yes |
58. | South Africa | Yes |
59. | Spain | Yes |
60. | Sri Lanka | Yes |
61. | Sudan | Yes |
62. | Sweden | Yes |
63. | Swiss Confederation | Yes |
64. | Syria | Yes |
65. | Tajikistan | Already have provision for exchange of banking information |
66. | Tanzania | Yes |
67. | Thailand | Yes |
68. | Trinidad and Tobago | Yes |
69. | Turkey | Yes |
70. | Turkmenistan | Yes |
71. | UAE | Yes |
72. | Uganda | Yes |
73. | UK | Yes |
74. | Ukraine | Yes |
75. | USA | Yes |
76. | Uzbekistan | Yes |
77. | Vietnam | Yes |
78. | Zambia | Yes |
Note 1: The three countries, i.e. Iceland, Tajikistan and Myanmar already have the specific provision and hence, remaining 75 countries were taken up for renegotiation.
