22-Jul-2011 | 17:40 IST | Edited by: Vishal Bagaria

In an effort to prevent laundering and constant flows of black money from bank accounts, the Income Tax authorities are in process of signing treaties with tax havens to disclose relevant information about such transactions.

In July 2011, three businessmen belonging to the same family were investigated upon by tax officials in Mumbai and Kolkata, along with their tax returns and passports.

In an era of tax evasion gaining prominence and tax inspectors aggressively inquiring to trace clandestine income of wealthy individuals, the investigations imply that tax havens are gradually, but definitively,  sharing specific information with Indian authorities.

News reports stated that during March-April 2011, the three businessmen had shifted money from their bank accounts in Isle of Man, Cayman Islands and Guernsey. In the first case, money was wire transferred from Guernsey to Switzerland while in two other cases, funds were moved from personal accounts to accounts of trusts where the individuals concerned were beneficiaries.

The assumptions of tax authorities being blissfully unaware of such undisclosed transactions is no more rational for businessmen, having their investments in tax havens.

Legally, according to the exchange of information alliances, economies are supposed to share information, provided that the other country has reasonable ground to believe there has been a tax offence, and not general inquiries, as such. In this case, the tax department indeed had something definite to back the summons.

The three businessmen featured in the list of Indians (some of whom are NRIs) who had accounts in a Liechestien bank. In 2009, Germany had shared the list with the Indian government. The Income Tax Department has concluded the assessment and has demanded from most in the Liechestien list, and some cases have reached the appellate stage. Yet, this stands as no ground for the case.

Tax authorities feel that the tax havens are co-operating in providing them with relevant information as to black money laundering.

Moreover, the passport numbers, used by banks for the 'know your customer' procedures, are used in acquiring bank account or transaction details of residents. Indian tax officials can approach tax havens with basic details like name, address, passport number and some evidence of tax violation (even a trivial one) to obtain information.

Tax authorities can verify passports to ascertain whether the concerned individual, who has claimed NRI status and obtained tax benefit, has spent the mentioned time abroad.

It is believed by organizations that such information flow must happen once tax treaties are in place. A treaty, to this effect, has already been signed with Singapore, in line with the modified treaty with Switzerland, following which Singapore can be asked for specific bank account details.

External Links:
Official website of the Income Tax Department of India.

Tax Haven  : A tax haven is a state or a country or territory where certain taxes are levied at a low rate or not at all while offering due process, good governanceand a low corruption rate.

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