Tax pacts not blocking black money offenders, says govt

As the government draws flak for allegedly not taking forward black money cases under the garb of bilateral treaty clauses, the finance ministry today made it clear that these tax agreements do not come in the way of legal prosecutions against offenders.

However, till the time proceedings are initiated, the ministry cannot share information with the Enforcement Directorate (ED), Finance Secretary R S Gujral said today. “It is not correct. It is not that we cannot go for prosecution because we have committed something,” he told reporters.

To a query, he said the government had told a parliamentary panel that it could not ask for prosecution at this stage. He, however, admitted that there are secrecy clauses in the Double Taxation Avoidance Agreements (DTAAs), to which the government is committed.

“The commitment is regarding secrecy. Secrecy has to be maintained,” the top official said. However, as and when prosecution proceedings start, information comes into the public domain, he added.

Gujral also clarified that the ED could take action against alleged offenders once information becomes public — but not before that. “Before information is in the public domain, it cannot be shared even with ED.” The statement comes amid reports in certain quarters that the French and German governments had told India not to share details of accounts and individuals with investigating agencies.

Treaty clauses, which allow India to get information on accounts held in a bank in Germany and another in Switzerland, provide that tax officials cannot share them with agencies responsible for criminal investigation without clearance by source countries. The government had recently told Parliament’s standing committee on finance that it had requested Germany to share information with ED. The request is still under Germany’s consideration, the government had said, according to officials.

The government has already completed a probe in the case of 18 individuals holding accounts with LGT Bank in Liechtenstein. However, it is not revealing names, saying that once proceedings start, names will automatically come in the public domain. Before, that secrecy clauses comes into force.

Recently, India had received information from France and Germany on secret accounts of some prominent people. The Directorate of Criminal Investigation has started sending notices to such people. But, the government maintained that it would reveal their names only in the court.

There were also rumours that some members of Parliament have been summoned for allegedly keeping secret accounts in HSBC, Geneva. The finance ministry later denied this. As per the India’s treaty with the Swiss government, names cannot be revealed before the prosecution.

Under attack from various quarters for not doing enough to crack down on tax havens, the government has amended DTAA with 81 countries. Specific requests in 333 cases have been made by Indian authorities for obtaining information from foreign jurisdictions.

Over 9,900 pieces of information obtained regarding suspicious transactions by Indian citizens from several countries have been obtained which are now under different stages of processing and investigation.

Under the DTAA with France, India has received some information regarding Indians having bank accounts. In 69 cases, the taxpayers have admitted to unaccounted income of Rs 397.17 crore. Taxes of Rs 30.07 crore have also been paid.

As for the direct taxes code, the finance secretary said its rollout from the scheduled date depends on tabling of report by Parliament’s standing committee on Finance. “If it gets delayed (beyond winter session), then obviously it’s beyond the control of the government.”

The standing committee members have already expressed inability to submit the report in the ongoing winter session.

On recapitalisation of banks that is a panel within the ministry, he said, the issue was not of just providing funds. “The committee examined various aspect of the requirement and the ways to meet the capitalisation needs of the banks based upon the Basel III.”