Absence of criminal legal pacts with countries like Cayman Islands impacts black money probe
SIT is expected to soon send a report to the government in this regard with a request to ink MLATs with tax haven nations and all other jurisdictions important from the point of financial and tax evasion investigations, sources said.
Investigation agencies like the Central Board of Direct Taxes, the Central Bureau of Investigation (CBI) and the Enforcement Directorate working in the special investigation team (SIT) on black money have cited the absence of criminal legal treaties between India and tax havens as one of the major obstacles in bringing back illegal funds stashed abroad by Indians.
According to news agency PTI, these agencies have made these challenges known to SIT in a report after which the Justice (retired) M.B. Shah-led panel is preparing an action plan to be communicated to the government. The report, accessed by PTI, says that India has Mutual Legal Assistance Treaties (MLATs), or Multilateral Assistance Treaties, with about 37 countries which do not include many of the tax havens like Cayman Islands, Guernsey, Lichtenstein, Monaco, Bermuda, Malta, British Virgin Islands and others where a number of suspect black money probes are being conducted by Indian investigative agencies.
SIT is expected to soon send a report to the government in this regard with a request to ink MLATs with tax haven nations and all other jurisdictions important from the point of financial and tax evasion investigations, sources privy to the development said.
To impress upon the difficulty faced by agencies, the report cited two incidents of last year where tax sleuths were not able to attach and recover money in foreign bank accounts in the UK and Singapore through the home ministry and CBI as the existing treaties like Double Taxation Avoidance Agreement, Tax Information Exchange Treaty and those framed by the Organisation for Economic Cooperation and Development (OECD) were not helpful.
These treaties, sources said, provide for only collection of documents and do help in attachment or restraint of funds or assets of a suspect black money holder to India. Therefore, in a number of black money cases, Indian agencies are not being able to recover or repatriate these funds lying in foreign countries or bank accounts abroad for recovery of tax demands under domestic laws, they said.
When such cases are probed, there is no tax demand raised on them or penalty notices issued by a court and hence Indian agencies are not able to lay their hands on such suspected offenders. MLATs do not need this; if there is convincing proof, Indian agencies can block these funds or accounts easily, they said. The report also said most tax havens have not ratified or brought into force the Multilateral Convention of OECD.
Hence, this instrument is also not helpful for India in such cases even as the clamour to get back black money is being made for long now, they said.