Press Release, dated 10-8-2012

What this is

Press Release, dated 10-8-2012 was issued by the Central Board of Direct Taxes on 10 August 2012. Its subject is Initiatives Taken by the Government for Unearthing and Curbing Black Money : A Fact Sheet.

What it does

Is a fact sheet on the Government's measures against black money. It records a study on unaccounted income and wealth commissioned from three national institutes, to be completed by the end of 2012; the creation of a Directorate of Criminal Investigation as an attached office of the Board to track financial transactions relating to illegal and criminal activity, including cross-border transactions; coordination with the Election Commission on political expenditure and candidates' affidavits; and a committee under the Chairman of the Board on strengthening the legal and administrative framework, including declaring illegally generated wealth a national asset, confiscation and recovery, and exemplary punishment, which reported on 29 March 2012. On information received under tax treaties, the material from Germany and France was investigated, tax evasion of more than Rs 600 crore was detected and Rs 200 crore realised, prosecution was launched in 17 cases relating to accounts at a Liechtenstein bank, and assessment proceedings were begun in cases relating to accounts at another foreign bank. Over the preceding three financial years the investigation wing detected undisclosed income of over Rs 32,000 crore and seized assets of over Rs 2,600 crore, with a further Rs 17,325 crore detected in surveys; of 1,548 prosecution cases disposed of, there were 97 convictions and 771 compoundings. On the legislative side, of 78 agreements in force in 2009, 75 lacked provisions for exchange of banking information and information without domestic interest, and renegotiation was completed in 29 cases, with 19 new agreements and 17 new information exchange agreements negotiated and 33 treaties signed; India also signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 26 January 2012, which came into force on 1 June 2012, and legislated a counter-measure against non-cooperative jurisdictions.

Why it was issued

It is a consolidated statement of the steps taken under the Government's strategy against black money; no other reason is given.

Who it reaches

• Persons with undisclosed foreign accounts or assets
• Persons under investigation on information received from a foreign government
• Taxpayers dealing with entities in a jurisdiction notified as non-cooperative

The instrument, as the Board published it

Initiatives Taken by the Government for Unearthing and Curbing Black Money : A Fact Sheet
Press Release, dated 10-8-2012
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 9th member 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.
7. Amendments made through the Finance Act, 2012 to deal with the Menace of Black Money:
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.
(h) 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 1st June, 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.
■■

What to watch

• It is a statement of administrative activity and figures; it confers nothing and imposes nothing.
• The figures are as at the date of the release and were overtaken; they cannot be used as the current position.
• The point of continuing significance is the machinery it describes — the exchange of information network, the Multilateral Convention in force from 1 June 2012, and the counter-measure provision for non-cooperative jurisdictions.
• The text before me is clipped in the paragraph on that counter-measure legislation, so read the release in full for the remainder.

Where you meet it

As background when a proceeding rests on treaty-sourced information or on a transaction with a notified jurisdiction.

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