The income tax department is keeping a tight vigil on Indians, notably the ones suspected of owning bank accounts, visiting tax paradises such as Switzerland, Cayman Islands, Mauritius and the Bahamas, as it amplifies efforts to trace tax evasion and slush funds tucked away abroad.
The tax department’s investigation directorates have been asked to collect information on Indians visiting tax havens, junior finance minister SS Palanimanickam replied to a query in the Rajya Sabha on Tuesday.
Besides peering into the itineraries of passengers from airlines, the government is also stationing tax officials in these destinations to keep a watch on Indians. Taxpayers will have to also declare details of their foreign travels while filing returns.
The latest measures are part of the government’s redoubled efforts to crack down on money laundering as concerns grow over links between tax evasion and terror funding. Black money stashed away by Indian businessmen in tax havens was a raging topic during the last general elections, with the BJP penciling the figure at nearly Rs 70 lakh crore.
India is part of a long lineup of countries, including the US, pursuing tax transparency across the globe. The government is in talks with 20 tax havens including the Bahamas, Monaco, Panama, Seychelles, St Kitts & Nevis and the Maldives for new treaties that promise to exchange information more openly.
The so-called Agreements for Exchange of Information and Assistance in Collection will give India access to bank account details in these places.
The government has also started fresh talks with all the 77 countries with which it has double tax avoidance treaties (DTAAs) to increase their scope and prise out more information.
Paris-based Organisation for Economic Co-operation and Development, which has long led the fight again money laundering, lauded the efforts of India and governments across the globe in a recent circular. OECD said tax havens signed more than 300 agreements last year after greater scrutiny on hush money.
The government also recently posted two senior Indian Revenue Service officers as first secretaries at its missions in Singapore and Mauritius , which are hotbeds of investments into India.
On Tuesday, Mr Palanimanickam said there is no verifiable information available about black money amassed in foreign banks, but indicated that the government is stepping up the focus on the dodgy practice.
Agents and officials of foreign banks that offer services and facilitated the opening of bank accounts are also on the government’s radar.
The tax department also plans to create divisions and post officers at the Indian missions in the US, the UK, the Netherlands, Japan, Cyprus, Germany, France and the UAE for raising the vigil on evaders and greater exchange of information.
“These units are aimed at increasing flow of information from these jurisdictions on a real-time basis,” a Central Board of Direct Taxes (CBDT) official told ET. The present practice is clumsy and wrapped in red tape. CBDT has to write to Indian missions or foreign governments for information under the DTAAs.
CBDT is also looking to tweak India’s tax treaty with Mauritius to shut the door on tax exemptions on capital gains on investments from that country. The treaty in its current form is a big draw for investments into India.