The government may soon be able to obtain classified financial data from tax-haven countries and some foreign shores as it plans to set up new overseas Income Tax offices in countries like the US, the UK and Cyprus to liaise with local tax authorities.
The units will be manned by a senior Income Tax officer adept in handling tax evasion cases and international tax treaties and will help the department gather investments details of high-profile cases which the I-T is currently investigating.
The eight units will begin functioning in less than two months in the United States of America (USA), United Kingdom (UK), Netherlands, Cyprus, Germany, France, Japan and United Arab Emirates (UAE). Two such units in Singapore and Mauritius are already operational since last year.
The units will also help investors from abroad and help them understand Indian tax laws and procedures so that they can make informed decisions, sources familiar with the development said.
A number of financial links during the department’s probes connect to these countries and the government has to then proceed with a lot of documentation work and involving travel by officers. By having an office in such countries, the Finance Ministry expects the process to become fast.
Finance Minister Pranab Mukherjee has recently approved the posting policy for the probable I-T officials for the centres who will be appointed by January-end, sources said.
The minister has also asked the Central Board of Direct Taxes (CBDT) to fast track the process and operationalise the units quickly, they said. The I-T officers will be designated as First Secretaries at the Indian Mission or Embassy at these foreign locations.
The units would also obtain seamless flow of information on tax and financial data of investments made by individuals and institutions in these countries and facilitate any data on investment or routing of money in the country and vice-versa.
This information obtained helps during investigations in cases of tax evasion and ensuring tax compliance under the provisions of the Double Taxation Avoidance Agreement (DTAA) and other tax treaties to facilitate exchange of financial information, sources said.
The Finance Ministry has made it an essential criteria that any senior I-T officer who will be posted in these units should have had a stint in the foreign taxation wing of the CBDT, international taxation and transfer pricing unit of the I-T department and also at the investigation wing.
The officer should also have the knowledge of tax and other laws of these countries, they said.
The ministry has also mandated that the last five Annual Performance Appraisal Reports (APARs) of such an officer should be evaluated as either “outstanding” or “very good”.
The shortlisted officers will also be interviewed by a panel headed by the CBDT Chairman and including other members of the board and Joint Secretaries in the Finance Ministry.
“The experience of actual work (by an aspiring officer to be posted at these units) of exchange of information, Mutual Agreement Procedure, tax treaty negotiation would be given more preference.
“After obtaining the approval of the Finance Minister (on the finalised officers), the panel shall be forwarded to Ministry of External Affairs for their concurrence followed by reference to Appointments Committee of Cabinet for final approval,” a Finance Ministry notification said in this regard.