G20 nations to focus on cross-border movement

The G20 countries have agreed to sign a Convention on Mutual Administrative Assistance in Tax Matters, paving the way for a closer eye on cross-border movement of black money. The final G20 communique, however, did not come out strongly against tax evasion; instead merely underlined the importance of comprehensive tax information exchange.

Those among the G20 countries to have signed the Convention on the occasion were Argentina, Australia, Brazil, Canada, Germany, Indonesia, Japan, Mexico, Russia and Turkey. It had already got approval from France, Italy, Korea, Mexico, UK and the US.

Prime Minister Manmohan Singh too hinted at the difficulty in India’s efforts to get back black money in the near future. “It is a work in progress,” he said at a press conference here. Singh admitted that his government did not have an accurate assessment of the magnitude of black money abroad; nor was it aware of a full-proof system that would ensure its return.

 

Instead, he said, the only secure long-term way was to create an environment that would discourage the flow of money to outside. “We have to create an environment in which our people will have the incentive to bring black money back home...that India is land of opportunity. Therefore, it is no longer necessary for people with surplus money to look for greener pasture outside.”

Yesterday, Economic Affairs Secretary R Gopalan had, after a meeting of officials here, said tax evasion and illicit flows were a serious problem. In a bid to check this trend, India had, over the last two years, negotiated 19 new Double Taxation Avoidance Agreements and 17 new Tax Information Exchange Agreements. In addition, 22 existing Double Taxation Avoidance Agreements have been renegotiated. All these 58 agreements provide for tax information exchange in accordance with international standard.

For these instruments to be effective, he said it was vital to build a consensus on applying the standards to past information, including banking information, so that earlier evasion is also investigated. This is essential, Gopalan said, if one had to respect the spirit of the G20 London Summit that “the era of bank secrecy is over”.

He urged the G20 members to take the lead by exchanging information automatically with their treaty partners and urge other countries to do the same.

The official further expressed the hope that the Multilateral Convention on Mutual Administrative Assistance in Tax Matters would help progress in this regard.

Non-government organisations, keeping an eye on the proceedings of G20, expressed dissatisfaction with the efforts on black money.

Oxfam said the principle of a multilateral convention on tax was welcome, but it must make it possible for poor countries to recoup the 125 billion Euros in tax revenue that lose each year due to corporate tax dodging. “But this convention is immediately flawed,” according to the NGO’s spokesperson Luc Lampriere, “because of a proliferation of new bilateral deals that allow tax havens to keep their secrets safe.”

Britain and Germany has just signed deals with Switzerland, which allow some repatriation of tax revenue, but still guarantees Swiss banking secrecy. “Transparency should be at the heart of cooperation between governments to fight against opaque structures like anonymous banking accounts or shell companies,” Lampriere added.