India joins global pact for automatic exchange of financial data

Platform of 60 nations to help curb tax evasion and black money

India and five nations on Wednesday signed an agreement to join 60 countries, including Switzerland, to exchange financial information automatically from 2017.

The platform, called the Multilateral Competent Authority Agreement (MCAA), was expected to tighten the noose on those having black money overseas.

In press statement, the finance ministry said the agreement was signed by India, Australia, Canada, Costa Rica, Indonesia and New Zealand in Paris, where a meeting of the Organisation for Economic Co-operation and Development (OECD), which had prepared a standard for an automatic exchange of information, was on. The new mechanism would allow exchange of information on an annual basis, including account balances.

"Ninety-four countries have committed to exchange information on an automatic basis from 2017 onwards, according to the new global standards on automatic exchange of information, known as common reporting standards (CRS) on automatic exchange of information (AEOI)," said the press statement.

Exchange of information based on CRS would enable India to receive information from almost every country in the world, including offshore financial centres. This could be instrumental in preventing international tax evasion and avoidance, and getting information about assets of Indians held abroad, including through entities in which Indians are beneficial owners.

"This will help the government curb tax evasion and deal with the problem of black money," said the government.

The agreement of AEOI and Foreign Account Tax Compliance Act (FATCA) with the US were to be signed last year but the government had to drop the plans at the last minute in the wake of a Supreme Court observation related to confidentiality clause in the treaties as well as the double taxation avoidance agreements.

Sources said the date and other modalities for signing FATCA were being worked out with the US government and a deal could be signed by September.

Fifty-one countries had joined MCAA on October 29, 2014, in Berlin. Switzerland became the fifty-second country on November 19, 2014. Ghana and Seychelles joined MCAA on May 14, 2015.

The new global standards are wide in scope and oblige the treaty partners to exchange a wide range of financial information after collecting these from financial institutions in their country.

For facilitating the exchange of information with other countries, necessary legislative changes have been made through the Finance Act, 2014.

"Rules and guidelines are being formulated in consultation with financial institutions," the release added.