core sector communique

Black Money

The issue of black money has attracted a lot of attention in the recent past. I will like to take this opportunity to share with you the proactive steps taken by our Government to combat the menace of illicit funds generated both as a result of tax evasion and corruption.

2. So far there are no reliable estimates of black money both inside and outside the country. The interim recommendations of BJP Task Force 2009 have estimated the amount of black money to be between USD 500 billion to USD 1,400 billion. A current study by Global Financial Integrity has estimated the present value of illicit money outflow to be USD 462 billion. All these estimates are based on various unverifiable assumptions and approximations. Government has been seized of the matter and has constituted a multidisciplinary committee to get studies conducted to estimate the quantum of illicit fund generated by Indian citizens.

3. Government has formulated a five pronged strategy which consists of joining the global crusade against ‘black money’; Creating an appropriate legislative framework; Setting up institutions for dealing with Illicit Funds; Developing systems for implementation; and Imparting skills to the manpower for effective action.

4. We have made substantial progress:

• India has completed negotiations of ten new Tax Information Exchange Agreements with Bahamas, Bermuda, British Virgin Islands, Isle of Man, Cayman Islands, Jersey, Monaco, Saint Kitts & Nevis, Argentina and Marshall Islands out of 22 identified countries/jurisdictions.

• India has initiated process of negotiation with 65 countries to broaden the scope of Article concerning Exchange of Information to specifically allow for exchange of banking information and information regarding taxpayers not covered by DTAA. As on date, negotiations have been completed with 10 existing DTAA countries to update this Article. Agreed texts have been initialed. Thirteen new DTAAs have also been finalised where the Exchange of Information Article is in line with the international standards. In short negotiations/renegotiations of DTAAs with 23 countries have been completed.

• We are strengthening the administrative machinery by setting up eight more income tax overseas units. Two such units are operational in Singapore and Mauritius.

• Strength of foreign tax division has been doubled. As a part of capacity building exercise 36 officers were sent abroad for specialized training in transfer pricing and international taxation. • Government is setting up an Exchange of Information (EoI) Cell, which will help in effective exchange of information to curb tax evasion.

• Information regarding details of payments received by Indian citizens in several countries has started coming from treaty partners. This information is in different stages of processing and investigation.

• We have detected undisclosed income of about Rs.15,000 crores in last 18 months, due to focused search operations by the Income Tax Department.

• During the same period, Directorate of International Taxation has collected taxes of Rs 34,601 crore. The Directorate of Transfer Pricing has detected mispricing of Rs 33,784 crore, which has prevented shifting of an equivalent amount of money outside India.

• Necessary provisions have been made in the proposed Direct Tax Code to create legislative framework to check illicit outflows of funds.

• India’s Membership in FATF in June last year, is in recognition of the strength of our anti-money laundering and anti-tax evasion measures. India has also gained Membership of the Eurasian Group (EAG).

• India has joined the Task Force on Financial Integrity and Economic Development in order to bring greater transparency and accountability in the financial system.

• India has also played a very active role in G-20 by identifying issues and drafting communiqué. Due to active role in ‘The Global Forum on Transparency and Exchange of Information for Tax Purposes’, India has become Vice Chair of the peer review group.

• On 1st June 2009, the Prevention of Money Laundering Act (PMLA) has been amended whereby the predicate offences listed in the Schedule to the Act were substantially increased in terms of the Acts covered and sections covered under such Acts. This amendment has tremendously widened the scope of money laundering investigations by the Directorate. FIU-INDIA is fully functional now.

5. The early results of our initiatives are encouraging. These proactive steps led to additional collection of taxes of Rs. 34,601 crore and detection of additional income of Rs. 48,784 crore on which taxes are being collected. I am confident that the results will be quite satisfactory in the days to come.