As we all are well aware of the term ‘Tax’ which is defined as a revenue that is levied on the people by the Government based on their income and the commodities they purchase or sell. Evasion of Tax has always been considered to be an illegal action and people with greed often engage in such activities and face the repercussions. One of the common practices to avoid tax is that people stock their money in non-taxable countries which are collectively known as ‘Tax Havens’. Individuals who earn hefty sum often indulge in such illicit activities in order to avoid the heavy imposition of taxes by the Government. The authors in this research article would like to cite out the legality of tax havens along with the reverberations that the economy would face and the growing trends in the economy.

Keywords: Tax havens, economy, black money, offshore shell companies, Tax evasion.


Evasion of tax has been a contemporary issue in the recent times. Article 265 of the Indian Constitution states that taxes can only be levied through the Income Tax Act, 1961 and the Central Excise Act, 1944. Tax Havens or Offshore Financial Centres (OFCs) are those non-taxable countries or countries that levy low taxes on individuals and corporations. The term ‘Tax Havens’ has been extensively used since the 1950s but the same was developed in the early 1920s and 1930s. After the 1950s, corporate entities increasingly began to use tax havens in order to lower their global tax obligations. The first and foremost reason is that entities and individuals prefer to retain their earnings in Tax Havens as they do not require the residence or operation of businesses of individuals for the purpose of depositing their money. Secondly, an excess of income generated by the individuals and the entities by engaging themselves in illicit activities influences one to avoid the heavy imposition of tax liabilities as the earnings amount to Black Money which is illegal.

‘Black Money’ is a term which is used for the income earned through illegal activity in order to evade tax. The National Institute of Public Finance and Policy (NIPFP) in its 1986 report entitled ‘Aspects of Black Economy’ has defined Black Money as aggregate of incomes which are taxable but not reported to the tax authorities. Due to such activities, the revenue of the Government has been decreasing and is at stake.

Many U.S. Corporations like Apple, Microsoft etc., deposit their illegally earned money in a Tax Haven Country for the purpose of minimizing the corporate taxes imposed upon them by the Government. By avoidance of Taxes, the Government faces lots of repercussions which eventually leads to recession. Introduction of Demonetisation Policy in 2016 took a major stance in curtailing the tax evasion through penny stocks which helped in the eradication of black money. It is the obligation of every citizen to pay their taxes honestly without resorting to subterfuges. Avoidance or Evasion of Taxes arises when an assessee fails to disclose material particulars deliberately and furnishes such false or inaccurate particulars with an intention to defraud the state.

In Mc Dowell & Company Limited V. The Commercial Tax Officer[1], the Court held that Colorable devices cannot be a part of tax planning and it is wrong to encourage or entertain the belief that it is honorable to avoid the payment of tax by resorting to dubious methods.


  • Less tax paid

Governments are unable to collect the estimated amount of tax due to the evasion and black money being transferred to tax havens. As per the NIPFP reports, it has been stated that close to 42% of the total GDP comprises of illicit wealth of the nation. This is one of the major reason as to why India is still a developing country.

  • Raise of corruption

The entire economic system of the country has been corrupted due to the increase in corruption born out of black money. Bribery which has been one of the main tools for corruption has been a common practice in our country.

  • Increasing one’s liability

The transfer of income earned via illegal activities to tax havens by the evaders affects the economic growth of the country. If the government recovers that amount, it could not only pay off the outstanding liabilities but also can make the funds available for developmental projects.

  • Technological glitch

Due to the lack of funds which cannot be accumulated by the government, they are unable to stay updated with the technology. This in turn directly affects the development of the country.


As the origins of the generation of Black Money are diverse and keep varying from time to time there cannot be an omnibus law to govern the same. Therefore, in India to deal with these issues related to Black Money, the legal framework has been dispersed in economic laws, penal laws, tax laws, etc. The various legal provisions are as follows:


  • Section 131 of the Income Tax Act, 1961: The powers of the court under this section are co-existent to that of a Civil Court such as to Discovery and Inspection under Order XI, Summoning and attendance of witnesses under Order XVI and Issue of commission for the examination.
  • Section 132 of the Income Tax Act, 1961: The search under this section can only be authorized by an officer of the rank of the commissioner or above. The officer must adhere to certain conditions before authorizing a search. This section includes the power to seize documents, books, cash, other valuables, etc.
  • Chapter XXI of the Income Tax Act, 1961: There are various monetary penalties fixed at different rates for various defaults such as failure to comply with the statutory notices, Concealment of Income, Failure to maintain books of accounts, etc. The maximum amount of penalty prescribed is 300% for the amount of tax which was evaded.
  • Chapter XXII of the Income Tax Act, 1961: It deals with the prosecution for the various offenses with regards to the deliberate evasion of tax such as failure to deduct and deposit taxes, failure to produce accounts and furnish tax returns, etc. Up to 7 years of rigorous imprisonment with a fine can be imposed on the tax evader.


After the enactment of the Income Tax Act of 1961, it was observed that a lot of people had entered into benami transactions to hide from the real transactions. Benami purchase is a transaction in the name of another person, who actually does not pay any amount of consideration but only confers his name and the control of the transaction is vested with the person who paid the consideration for the purchase of the property as he is the beneficial owner. The Law Commission of India was asked to examine the aspects of benami transactions and its consequences. In order to implement the recommendations of the 57th report of the Law Commission, the Benami Transaction (Prohibition) Bill was introduced in the Parliament and after receiving the assent from the President the Benami Transactions (Prohibition) Act was enacted. The Bill provided the following:

a) Any person who enters into a benami transaction after the commencement of the act will be an offense. Transfer of properties by the father or husband for the welfare of the unmarried daughters or the wife will be treated as an exception and will not amount to an offense under this act.

b) The benami properties will be susceptible to acquisition by the concerned authority in such manner as prescribed by the rules in the said legislation.

c) It was found during the formulation of the rules for the implementation of certain provisions of 1998 act that the aforesaid act was insufficient to deal with benami transactions due to the following reasons:

i) The Act did not accommodate any particular provision for bestowing the confiscated property with the Central Government.

ii) The Act did not provide for any provision with regards to an appellate mechanism against an action which was taken by the authorities under this Act.

Due to the above shortcomings, there was a need for a comprehensive legislation for the prohibition of holding a property in benami and also to restrict the right to transfer or recover property held with benami. Furthermore, it must also provide a procedure and mechanism for the confiscation of the property held by benami. Therefore, the 1988 Act was repealed and a new bill was introduced in the Parliament in 2011 to enact a new detailed legislation to deal with benami transactions. This Bill provides the Following:

a) It forbids benami transactions by any person.

b) The Central Government has the power to confiscate benami property which arises out of a prohibited benami transaction. The property shall absolutely vest with the Central Government without paying any amount of compensation.

c) It forbids the right of the benamidar to recover the property held by benami.

d) An appeal can be filed to the High court on any question of law against the decision or order of the Appellate Tribunal by the aggrieved party.


The investigations under FEMA with regards to specific cases relating to the infringement in foreign exchange transactions by persons residing in India are taken up by the Enforcement Directorate. As per Section 4 of FEMA, holding unauthorized funds outside India by a person who is the resident of India is violative of the aforesaid provision. As per Section 13(1) of the Act, an appropriate penalty can be imposed for the contravention of Section 4 of the Act. Furthermore, apart from the imposition of a penalty, as per Section 13(2), the adjudicating authority can also confiscate the amounts lying in a foreign country and direct them to bring it back into India. There is no criminal prosecution as FEMA is a civil law.


Prevention of Money Laundering Act is a criminal law. Under the measure of the Act, money laundering is linked to predicate schedule offenses which are liable for punishment. Section 3 of the Act defines the offense of money laundering. Once the representative concerned with the predicate scheduled offense registers a case, the Enforcement Directorate initiate an investigation under PMLA to determine the crimes generated from the predicate schedule offenses. In case of a prima-facie case, the PMLA allows for seizure and attachment of the laundered properties. Both the natural and legal entities can be prosecuted under Section 44 of PMLA by the Special Courts. Section 4 of the Act provides for rigorous imprisonment for 8 years with a fine of 5 lakhs which may extend up to 10 years if the accused has committed an offense of money laundering linked to narcotic trafficking.


This act has been passed to consolidate the laws relating to the prevention of corruption and for the matters connected with it. This maximum amount of punishment under the said Act is 7 years of rigorous imprisonment and fine. India has ratified the United Nations Convention against Corruption and United Nations Convention against Transnational Organized Crimes along with its Three Protocols. The Convention puts forth in detail the measures to prohibit corruption, it also includes the application of prevention policies, the establishment of various competent bodies for the said purpose, etc.


There are two types of issues that occur with regards to black money – firstly, its generation and secondly, its use and consumption which includes black money laundering back to the conventional economy. Therefore, while dealing with the curbing of black money both these aspects have to be covered. The various strategies to tackle black money are as follows:

  • Preventing the generation of black money
  • Effective detection
  • Disapproving the use of black money


India must adopt Time-bound, transparent and regulated permits/approvals and single window delivery of various services to the degree possible. The Electronic Bill of 2011 provides for various services through electronic delivery which leads to transparency, accountability, efficiency, reliability and accessibility in the delivery of such services.

The combat against the laundering of black money must be done on three heads such as an ethical, administrative and socio-economic level. With regards to the ethical level, the government must try to reinforce the values and moral education in the schools which will throw a light on the aspects of the illegality of generation and use of black money. This would help in building good character citizens due to the awareness that is created. The Government must legislate public procurement laws in order to maintain transparency and equitable treatment of competition, bidders which would enhance economy and efficiency in the administration.

Various huge public expenditure Social sector schemes for various agendas suffer from many leakages and manipulations. The best solution would be to channelize direct transfers to the account of beneficiaries as it would prevent leakages and manipulations. The social audits must be made imperative for all social sector schemes which do not have the direct transfer of credit to the account of the beneficiary and at different levels of audit.

The aspect of oversight is absent in the private sector except for some professionally managed firms. The oversight mainly consists of self-regulation and audit under the Income Tax laws and Company laws. Keeping in mind the Satyam case it is apparent that even in professionally managed firms the system of audit is ineffective. The authors would like to submit that the implication of dual audit must be reduced to a single audit which must be detached from the control and management of the business. Therefore, the government must appoint auditors in different levels and they must be randomly appointed to the various private sector firms based on payment capacity and category.

In the latter investigation done by the Income Tax Department on the mining industries in Karnataka, it has been found that the state allows the unregistered dealers to trade in various minerals as a measure to raise revenue. This particular act of the state is contrary to the Central Mines and Minerals (Regulation and Development) Act, 1957 as it encourages unregulated trade and illegal mining of minerals. Therefore, this state of affairs requires immediate remedy and all the laws relating to regulation and licensing in mining needs an extensive review.


The authors submit that the Government must contemplate in amending the existing laws or enact new laws for the regulation of transportation and possession of cash, enforcing a limitation on the cash holdings for private use, provisions for confiscating the money held beyond the prescribed limit. These changes would label the concerns of the courts and election commissions as it would reduce the influence of money capacity during the elections.

In order to reduce the aspect of black money with regards to the transactions pertaining to immovable properties, the provision for No Objection Certificate (NOC) must be instituted in the Income Tax laws along with the safeguards to minimize the administrative difficulties and increase the ease of compliance. This helps in setting up a uniform database and a bona fide national-level regulation. The Institute of Chartered Accountants of India (ICAI) must modify the Accounting Standard No. 7 to be made germane to real estate developers.


The Central Government and State Government must strengthen the enforcement and regulation of KYC norms in the co-operative sector. Control must be fixed for any failure in this regard, also for any following failure to notify the authorities with regards to any suspicious transactions in analogous accounts.

The Reserve Bank of India should contemplate on the stringent implementation of KYC norms and restrict the number of accounts that can be created by a single person. The Ministry of Corporate Affairs may examine about placing a limit on the number of firms operating from the same establishment as the Ministry already has the database of all the companies.

Efficient monitoring and reporting systems should be emplaced to trace the transactions in jewellery and bullion through the Customs/Income Tax Acts. The Income Tax department should frame rules for purchase/jewellery/sale of bullion and collection of Taxes for the purchases made specifically in cash. The Income Tax department must set up a Directorate of Risk Management for effective risk analysis and data mining. Moreover, the third party reporting mechanism of the IT Department must be computerized and cover most of the high-value negotiations in the corporate sector.


Offshore Financial Centres and Tax Havens are considered to be the two major sources to deposit or invest one’s money. However, there is a minute distinction between offshore financial center and tax havens.

Tax Havens are recognized for their secretive banking laws where there is a reduction in the rate of payment of taxes based on one’s income or capital gain. The confidentiality of information of the account holders in a tax haven country is high compared to that of the Offshore Financial Centres. The purpose of maintaining such secrecy is to conceal the activities which take place in such jurisdiction. On the other hand, an Offshore Financial Centre has been recognized as a country or a jurisdiction which provides financial services to the non-residents that are incommensurate with the size and the financing of its domestic economy. Hence, the concealment of confidentiality of information is high in tax havens as the levy of tax covers the residents as well as non-residents when compared to Offshore Financial Centres.


Over the years many countries have been presenting themselves as Tax Havens in order to attract foreign investment. There are many countries that levy no taxes or low taxes, apart from this, there are also countries that offer special exemptions for investors.

  • A ‘No-Tax Haven‘ country is one that does not levy any taxes for any sort of income. Although there are no taxes levied, these countries do charge fees for incorporations, filings, and other regulatory services. Bahamas, Cayman Islands and Bermuda etc., are some examples of no-tax havens.
  • A ‘Low-Tax Haven‘ country usually levies some tax on the income of an individual or a corporate entity regardless of the income earned. Barbados, British Virgin Islands, and Cyprus are some examples of low-tax havens.
  • A ‘Special Tax Haven’ country levies most of the usual taxes imposed by other countries. However, they have a legislation that allows them for special treatment with regards to international business corporations and exempt companies. Austria, Netherlands and Liechtenstein are a prime examples for special tax havens.[2]


The two extensively used illegal methods for transferring one’s earning through illegal activities are Hawala and Trade Misinvoicing.


Hawala is recognized as an alternative method for transferring one’s income unlike the formal financial systems. It is otherwise known as ‘Underground Banking’. Hawala Transactions are mainly used for unlawful purposes. Many entities and individuals prefer to use hawala for transferring their illegally earned income to OFCs or tax havens but in few cases, it is used to transfer legally earned income through illegal means for avoiding heavy imposition of taxes. Many evaders prefer to use Hawala as there is a better exchange rate, faster transaction and no bureaucracy when compared to formal financial systems[3]. It is the simplest and easiest method to transfer the money as there is no requirement to produce any information with regards to the source of income as there is no physical movement of cash.


Trade Misinvoicing is a type of trade-based money laundering which is highly used for illegal financial outflows across the world. It is a method of transacting money illegally across borders which involves deliberately misreporting the value of a commercial transaction on an invoice submitted to the customs. Trade Misinvoicing is recognized as the largest component of illicit financial outflows measured by Global Financial Integrity (GFI).[4]

Global Financial Integrity provides the estimates for the illicit flow of money out of the developing world. According to GFI data of the year 2012, it has been brought to notice that the global figure of illicit financial outflows was close to $1 trillion. Based on the aforesaid study over 10 years, Asia continues to be one of the regions of illicit financial flows with the greatest volume comprising of 40.3% of the world total. India has been one of the top five exporters of illicit capital. Every year huge amount of money are being transferred illegally out of the developing countries. Resources are being stripped from the developing countries by not letting them provide public services for safety and the basic social services such as health and education.


As we all are well aware of the fact that there are always two sides to a coin. The same principle applies here too. Although Tax Havens is illegal, they benefit the economy of the particular country where the funds are invested. Tax Haven countries stimulate their economic activities by offering low tax rates and other tax features to those foreign investors.

Ireland has been one of the best examples among the tax havens whose economic growth has flourished. Ireland’s annual GDP grew at the rate of 3.3% during 1982-1999 whereas the world average was just 1.4% in the same period.[5] Many tax havens outperform other countries in terms of growth. Countries with low-tax rates tend to have a more favorable environment for economic growth. Singapore, Switzerland, Panama, and, Lebanon are some of the renowned tax havens which have increased their population as well as their annual GDP from 1981-2015 by offering low or other tax features.

An estimate of $21 – $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrect jurisdictions around the world. Illicit cross-border financial flows have been estimated at $1-1.6 trillion per year. It’s not only India who is facing a cash crunch due to tax havens, there are many other countries who suffer from this malice too. For example, European countries like Greece, Italy, and, Portugal have been suffering for decades due to tax evasion.


Developed Countries like Germany, France, and, USA began to look into the illicit funds kept by their citizens in various tax havens by bribing an unnamed informer more than $6 million for revealing the confidential information. It was brought to notice that 600 German citizens were involved in such unlawful activities. The International Monetary Fund (IMF) had evaluated the global black money and held that the extent of unsupervised financial economy is now considered to be ranked third with regards to the global GDP.[6]

Gian Maria Milesi-Ferretti, an economist of the International Monetary Fund in Washington, cited out the statistical information on Luxembourg which is known to be one of the largest offshore financial centers in Europe. He stated that Luxembourg is one of the few offshore financial centers that discloses its detailed statistics on assets and liabilities held in the financial sector, which makes it invaluable to interpret the cross-border money flows.

At the end of 2010, it was observed that an estimate of $21 trillion – $32 trillion of unreported private financial wealth was owned by individuals via tax havens. Sri Mulyani Indrawati, Minister of Finance of Indonesia, at an event on Tax Evasion and Development Finance in Washington, D.C., United States stated that as per the United Nations Conference on Trade and Development (UNCTAD) more than 60 percent of the global trade occurs within multinational groups. Added to that, a recent UNCTAD study indicated that about $100 billion in annual tax revenue is lost by developing countries in transactions directly associated with offshore hubs. There was an enormous ‘development finance’ loss around $250 to $300 billion which comprised of both revenues and reinvested earnings. This not only prevents the developing countries from stopping the outflow of money but also bleeds the revenue of the Government.[7]


The international connections for tax evasion and tax avoidance have become so wide that Multinational Companies (MNCs) are able to cross international borders in search of low or no tax regimes for the very motive of maximizing their profits. One of the primary reason for companies getting involved in such wrongful activities is for avoiding corporate tax which has a tremendous impact on both developing as well as developed countries. Transparency has been one of the main reasons for tracking down the global companies who are evading taxes in their countries.[8]

Corporate inversion has been one of the main strategy used by the companies to reduce their corporate tax burden. It is a process in which companies move to overseas to reduce their tax burden on their income. One of the well-known tax inversion was revoked by the Obama’s Administration new rules in April 2016 which was based on a $160 billion merger between New York-based Pfizer and Dublin based Allergan.[9] In order to avoid the heavy imposition of the corporate tax, companies shift their profits to low or no tax jurisdictions through various methods from transfer pricing to transferring royalty (generating patents to allocating more debt to high tax regimes). Realization of taxes from such shifted profits could pave the way for an increase in revenues of governments around the world by 4.5%.[10] The International Centre for Tax and Development (ICTD) stated that the profits generated by the MNCs in tax havens are enormous compared to the emerging market economies such as India and China. If a firm has the ability to shift profits to a low-tax jurisdiction, it not only affects the economic activity but also, in turn, affects the revenues.

Large corporations maintain their subsidies in offshore tax havens. Out of the 358 companies, nearly 72 percent of the Fortune 500 operate their subsidies in tax haven regimes. These 358 Multinational Companies maintain at least 7,622 tax haven subsidiaries. Fortune 500 are those top 500 companies which are ranked based on their revenue and profits. Currently, Fortune 500 companies hold more than $2.1 trillion accumulated profits offshore for tax purposes. Some of the companies have their subsidies offshore in order to evade tax liabilities are:-


Apple company has booked more than $181.1 billion offshore. It owes an estimate of $59.2 billion. In 2013 senate investigation, it was found that Apple has structured two Irish subsidiaries to be tax residents of neither the United States, where they are managed and controlled nor Ireland, where they are incorporated. This type of arrangement clearly signifies that Apple pays no tax to any government on the lion’s share of their offshore profits.


The well-known credit card company officially reports $9.7 billion offshore for the tax purposes on which it would owe approximately $3 billion. American Express maintains 23 subsidiaries in offshore tax havens. They have currently paid only a four percent tax rate on its offshore profits to foreign governments, which indicates that most of the money has been booked in tax havens which levies little or no tax.

  • NIKE

The famous sneaker giant officially holds $8.3 billion offshore for tax purposes on which it approximately owes $2.7 billion. This clearly entails that Nike pays a mere 2.5% tax rate to foreign governments on those offshore profits, indicating that nearly all of the money is officially held by subsidiaries in tax havens.

There are still companies which maintain hundreds of subsidiaries in tax havens compared to the above-mentioned companies. Some of them are as follows :-


Pepsico maintains 132 subsidiaries in offshore tax havens. The soft drink maker reports holding approximately $37.8 billion offshore for tax purposes.


The world’s largest drugmaker operates 151 subsidiaries in tax havens and approximately holds $74 billion officially in profits offshore for tax purposes. Pfizer was the fourth highest among the Fortune 500. It has recently attempted to acquire a smaller foreign competitor for the purpose of reincorporating on paper as a ‘Foreign Company’.


Morgan Stanley, an American multinational investment bank has around 210 subsidiaries in offshore tax havens. The bank approximately holds $7.4 billion offshore and it was found to be facilitating individual tax havens through its Swiss banking division.


Citigroup has around 427 tax haven subsidiaries in 2008 but it had only disclosed 41 in 2014. The company currently pays only an 8.5% tax rate offshore, signifying that most of their profits have been booked to low or no tax jurisdictions.


Walmart, a multinational retail corporation was found to be operating as many as 75 tax haven subsidiaries that were not included in its U.S. Securities and Exchange Commission filing. Walmart’s offshore income has approximately grown from $6.8 billion in 2005 to $23.3 billion in 2014.


Bank of America had been operating 264 tax haven subsidiaries in 2013 but it had only disclosed 22 in 2014. Bank of America’s offshore holding was approximately increased from $17 billion to $17.2 billion.


Google has been found to be operating 25 subsidiaries in tax havens in 2009, but since 2010 it only discloses two, both in Ireland. During the aforesaid period, the company had increased its offshore from $7.7 billion to $47.4 billion.


Microsoft was found to be operating 10 subsidiaries in tax havens in 2007, but it had only disclosed 5 in 2014. Microsoft only paid a tax rate of only 3% to foreign governments.


Goldman Sachs was approximately having 987 subsidiaries in offshore tax havens, out of which 537 were in Bermuda despite not operating a single legitimate office in that country. The bank officially holds $28.6 billion offshore.

MNCs which has been operating from India was found to have tax haven connections. It was well-established that such MNCs:-

  • Report 1.5% less
  • Pay 17.4% less in taxes per unit of the asset.
  • Pay 30.3 % less taxes per unit of profit.
  • Have 11.4% higher debt ratios than MNCs with no connection to tax havens.

According to the data produced by the Department of Industrial Policy and Promotion, around 60% of all the Foreign Direct Investment (FDI) equity inflows have been routed through 4 tax havens i.e., Mauritius (accounting for 34% of the total), Singapore (accounting for about 16%), Netherlands (approximately 6%) and Cyprus (for about 3% of the total).[11] Subsequently, The Indian Government negotiated for the inclusion of the Limitation of Benefits (LoB) clauses in the Double Taxation Avoidance Agreements with UAE and Cyprus. There are around 100 other jurisdictions including India who has committed themselves to the implementation of Base Erosion and Profit Sharing (BEPS). Furthermore, India had adopted the ‘country-by-country’ reporting norms, which means that the large MNCs will be forced to disclose information about the entire group’s operations all over the world.


The G20 summit was held at London on 2nd April 2009, the G20 countries agreed upon to define a Blacklist for tax havens and segmented them according to a four-tier system based on compliance with regards to an ‘internationally agreed tax standard’.[12]

There are three criteria’s that The Organisation for Economic Co-operation and Development (OECD) has come up with for assessing non-cooperative jurisdictions. Every country has to satisfy at least two criteria’s out of the three to escape blacklisting:

  • The country has to obtain a rating of ‘largely complaint from the Global forum of OECD, as regards to the ‘exchange of information on request’ standard of transparency.
  • The country must commit to adopt the automatic information exchange (Common Reporting Standard (CRS)) and begin the exchanges by 2018.
  • The country must sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCMAA), it is a multilateral framework for exchanging all kinds of information.


The world’s fourth largest offshore law firm, Mossack Fonseca located at the Panama City leaked 11.5 million files from its database which are known as The Panama Papers. A German newspaper named Suddeutsche Zeitung obtained the records from an anonymous source and shared it with the ICIJ. The ICIJ later shared the records with its international partners such as the Guardian and the BBC.[13] The ICIJ along with the German newspaper and various media partners spent about a year in examining the 11.5 million leaked files in order to expose the offshore holdings of political leaders, details of drug traffickers, celebrities, billionaires and links to global scandals. The set of documents is the biggest leak of secret information in history. The analysis revealed that more than 2,14,000 offshore companies are connected to people in more than 190 countries. The searchable database allows the users to traverse the networks of people and companies. The data leaked nearly covers forty years, i.e. from 1977 to 2015.

In the Indian dimension out of the 11.5 million leaked documents, 36,000 files were filtered by the Indian Express newspaper as they were the only newspaper affiliated to the ICIJ. Almost 500 Indian names were found on the firm’s list with regards to offshore companies, trusts, and foundations. The people on the list had availed the services of Mossack Fonseca. One of India’s top defaulters were Zoom Developers Pvt Ltd and its promoters as they were linked to an offshore trust which was registered in the British Virgin Island (BVI), according to an investigation in April 2013 by the ICIJ and The Indian Express on investments in offshore entities in tax havens by Indians.


  • The first and foremost attempt to eliminate tax havens and black money would be with the help of Double Taxation Avoidance Agreements (DTAAs). By utilizing the act, there is a possibility of receiving inside information by which there is a mere probability of recovering a small amount of money. With the enforcement of DTAAs, the Government ensured that Exchange of information as and when needed would be an essential article in accordance with the International Standard.
  • As per the UN Resolution, India can pass a law nationalizing their assets abroad in order to obtain classified information of all the holdings of its citizens in tax havens. Philippines, Egypt, and Libya have already passed a law and has taken this approach to the next level.
  • The Government of India has taken plethora number of legislative measures to expunge such illicit activities. Some of the proactive measures are Lokpal and Lokayukta Bill, 2011, Citizens’ Grievance Redressal Bill, Indicial Standards and Accountability Bill, 2010, Protection to Persons Making the Disclosures Bill, 2010 etc. Although various bills were passed with regards to the prevention of tax evasion and black money, there were still several outlets present which was being used. India can attain its objective by making an attempt to bribe the high-ranking official of an International Bank and receive the needed information from a tax haven such as Liechtenstein Bank.
  • Recently, Prime Minister, Mr. Narendra Modi had constituted a Special Investigation Team (SIT), to look into the proceedings pertaining to high-profile tax evasion cases and issue of black money.
  • There should be necessary co-operation from both the Central and the State Governments when any long-term strategy has been initiated to curb such illegal activities. Most importantly the Government should ensure that there is public acceptance and commitment to implement it.


The authors would like to conclude by stating that, in a fast-growing economy like India, there must be an appropriate legislative framework and speedier judicial processes to deal with such illicit money and tax frauds. Furthermore, an important factor which needs to be considered is that in a globalized economy the Government needs to take strong initiatives such as mutual co-operation internationally, institutionalization and expansion of information exchange at an international level to analyze the cross-border flow of illicit funds. The authors in this research article would like to humbly submit that India should participate in the global crusade against black money and should leave no stone unturned in order to eradicate black money and tax evasion.

[1] (1985) 154 ITR 148 SC

[2] https://www.lakewayinternational.com/taxhavens.html

[3] http://www.acfe.com/fraudnews-uk.aspx?id=4294974048

[4] https://www.gfintegrity.org/issue/trade-misinvoicing/

[5] http://fortune.com/2016/07/13/ireland-tax-haven-gdp-up/

[6] https://www.imf.org/external/pubs/ft/wp/2011/wp11197.pdf

[7] http://www.worldbank.org/en/news/speech/2015/04/17/speech-wb-md-coo-sri-mulyani-event-tax-evasion-development-finance


[9] https://www.reuters.com/article/us-allergan-m-a-pfizer-idUSKCN0X21NV

[10] https://www.livemint.com/Politics/IokyMXFN1Rpi4GP6mV3F4J/The-many-shades-of-corporate-tax-evasion.html

[11] https://www.livemint.com/Politics/IokyMXFN1Rpi4GP6mV3F4J/The-many-shades-of-corporate-tax-evasion.html

[12] http://www.oecd.org/ctp/42497950.pdf

[13] https://www.theguardian.com/news/2016/apr/03/what-you-need-to-know-about-the-panama-papers

Author Details:

Abhinov Vaidyanathan: B.B.A.,LLB (HONS), V Year, School of Law, Sastra Deemed to be University – Thanjavur, [email protected]

V.S.Krishna ; B.B.A.,LLB (HONS), IV Year, School of Law, Sastra Deemed to be University – Thanjavur, [email protected]

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August 2022