G20 backs India on black money hunt

India on Saturday managed to get backing of the world’s 19 most powerful economies on the issue of sharing tax information, as the G20’s draft communiqué for the first time took note of New Delhi's concerns. The draft, however, remained silent on recovery of ill-gotten wealth stashed in tax havens.

The draft communiqué, to be issued by G20 finance ministers and central bank governors later on Saturday, has resolved to address issues relating to the importance of comprehensive tax information exchange, and, in particular, encourage authorities to continue their work in the global forum to assess and better define the means to improve it.

“For the first time, there is an acceptance that the G20 will put its weight behind obtaining information. This is a big victory for India,” Department of Economic Affairs Secretary R Gopalan said.

In his bilateral meetings with finance ministers of Australia and France, Finance Minister Pranab Mukherjee said this was an important takeaway India expected from the Cannes summit.

In his intervention on Financial Regulation at a G20 session, Mukherjee said tax evasion and illicit flows have posed serious challenges to the efforts of the countries to raise revenue for development and to the growth of the world economy. He reiterated that automatic exchange of information was one of the most effective ways to improve voluntary tax compliance, and there was a need to make it obligatory.

In the last two years, more than 700 Double Taxation Avoidance Agreements (DTAAs) and Tax Information Exchange Agreements (TIEAs) have been signed as instruments for exchange of information.

For these instruments to become effective, it is vital that a consensus is built at the global level for applying these standards on past information, including banking information, so that earlier tax evasion can be properly investigated. This is essential if the spirit of the statement that “the era of bank secrecy is over” is to be respected and promoted, he said.

India also committed a donation of euro 3,20,000 to the Global Forum on Transparency and Exchange of Information for Tax Purposes to enable it to carry out this work effectively and efficiently.

There is a lot of pressure on the government back home to tackle the black money issue. India managed to get the issue reflected in the G20, despite no other country specifically raising the issue. India is believed to have pushed very hard to get the G20 in taking up the issue.

After the Pittsburg declaration many of the countries have extended cooperation for sharing information related to banking but India wants the process should be expedited and some information relating to past transactions is also needed, particularly from Switzerland and other tax havens where large amount of money is being deposited from different parts of the world.