BackIndia deals with fallout of Panama Papers
Narendra Modi also vowed to take action against all unlawful accounts held abroad
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New Delhi: The multi-agency probe ordered by Prime Minister Narendra Modi into the Panama Papers that allegedly name 500 Indians holding offshore bank accounts will be monitored and conducted under the stringent provisions of the new anti-black money law.
Modi also vowed to take action against all unlawful accounts held abroad.
The new law, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, is aimed at combatting the menace of black money generated by Indians in foreign shores, reported PTI.
Officials said the multi-agency group probe will be led by the investigations wing of the Central Board of Direct Taxes (CBDT), which, along with its foreign taxation wing and counterpart units of the Reserve Bank of India and Financial Intelligence Unit (FIU), will work on the latest disclosures.
“The Government is clear in its resolve is what I will say. There are no holy cows for us. Action will be taken against whoever is found to be in default," said finance minister Arun Jaitley, in an interview with The Indian Express, which broke the story in India on Monday.
The opposition Congress demanded that the Panama Papers be handed over to the Supreme Court, which is looking into the black money issue. It alleged that the government’s decision to constitute a multi-agency group was a “shoddy attempt" to brush aside the issue.
While celebrities like Amitabh Bachchan did not respond to calls relating to the Panama Papers, many others like Harish Salve and KP Singh came on record. Read more
The Modi government has been under pressure to bring back black money from abroad and fulfil its promises made in the runup to the 2014 Lok Sabha elections.
A 90-day black money window announced last year yielded undisclosed foreign assets of about ₹ 3,770 crore from 638 declarations, a mere fraction of the total stock of black money Indians are believed to have stashed abroad. Under the window, those with unaccounted foreign black money had to pay a tax of 30% and a penalty of another 30% to come clean, reports Firstpos.
On the regulatory front, more clarity is expected in India as there has been much confusion in the past.
Since 2004, the regulatory framework with regard to capital convertibility has been changed almost every three years, according to an Indian Express report.
Till 2004, the rules did not allow a resident Indian to transfer money to a foreign country for any purpose. But in that year, the RBI allowed the transfer of a sum of up to $25,000 under the Liberalised Remittance Scheme. Over time, this limit has increased tenfold. Through it all, however, the RBI allowed a regulatory gap, or rather confusion, to fester—as a result, it has not been clear whether Indians can set up entities abroad.
By the time the RBI allowed the setting up of 100% subsidiaries or joint ventures in foreign countries in mid-2013, such entities had already proliferated. Even now, it is unclear what the exact legal position is for those who have acquired already existing companies, such as the ones that Panamanian law firm Mossack Fonseca allegedly supplied off the shelf. The government as well as the RBI must now spell out rules that are lucid and explicit.
The second key issue framed by the Panama Papers is of propriety, or its absence, on the part of those on the list. It is this—the adherence to the law not just in letter but also in spirit—that separates tax planning from tax avoidance.
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