Black Money: Term ‘Tax Haven’ Banned in Foreign Information Requests, Says Report

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New Delhi: With a number of foreign jurisdictions taking exception to the term “tax haven” being used for them, the Central Board of Direct Taxes (CBDT) has directed that the expression be omitted in treaty communications sent by India eliciting information in black money probe cases.

The decision was taken recently by the Central Board of Direct Taxes (CBDT), the apex policy-making body of the income tax department, while framing rules for Exchange of Information (EoI) protocols and treaty processes between India and other countries under the Double Taxation Avoidance Agreement (DTAA) and the Tax Information Exchange Agreement (TIEA).

Official sources said that while the Board had flagged the issue with the field investigation offices of the Income Tax Department when the Manual of Exchange of Information was framed some time back, the word “tax haven” was still being used by investigators in their official dossiers.

They said some small countries, which are important with regard to key probes leading to their shores, had taken up the issue at the global level in general and, in some cases, with India.

The expression “tax haven” is used to indicate a jurisdiction, country or territory where the rate of taxes is either negligible or extremely low and which have a strict mechanism for financial secrecy and client data protection.

A recent CBDT communication, accessed by PTI, put on record the fact that a number of countries “have expressed their displeasure on use of such language (tax haven) and even declined to provide information in certain cases as the language used in the EoI request was found to be offensive”.

CBDT has asked the taxman to refrain from using the word anywhere and at any stage when cooperation is being sought on cases of black money and wealth stashed away abroad by Indians so as to not bring about a situation which “offends” the partner country and thereby creates obstacles in getting good results in an overseas probe.

The Foreign Tax and Tax Research (FT and TR) wing of CBDT is the mandated nodal wing under the Finance Ministry to collect and collate such requests from the field offices of the I-T department and other probe agencies and subsequently send them abroad.

The wing operates under various units and is mandated to focus on the various parts of the globe.