Economy
Group of 20 and the secret of real estate holdings
Summary
G20 nations are exploring new ways to unearth real estate holdings that are sought to be kept secretG20 nations are exploring new ways to unearth real estate holdings that are sought to be kept secret. The aim is to improve tax transparency and compliance. This push could eventually lead to a new global reporting framework for property assets. Mint explains.
Why are secret foreign assets a worry?
Tax evasion not only causes revenue loss to the exchequer, but also puts a burden on honest taxpayers. Indian policymakers have for long been worried about roundtripping—tax-evaded income in India flowing out, getting laundered abroad and returning in the form of foreign direct investments from tax havens. In the last 10 years, the government has tried to fix the loopholes in double taxation avoidance treaties that India has with countries like Mauritius. Greater cooperation with tax authorities in other countries is a key element in these efforts to un-earth undisclosed overseas assets.
Don’t the current laws address the problem?
In 2015, India enacted the Undisclosed Foreign Income and Assets (Imposition of Tax) Act—the black money law—to penalize concealment of wealth abroad. India also modified the Prevention of Money Laundering Act to attach domestic property equivalent to any proceeds of crime sent out of the country. It enacted the Benami Transactions (Prohibition) Amendment Act in 2016 to seize property held by proxies and prosecute the offenders. India also participates in an automatic global information-sharing system and has been exchanging information with Switzerland about bank accounts since 2018.
Haven’t all these laws worked?
Till the end of 2022, under the black money law, over ₹15,600 crore of tax demand was raised in over 400 assessment orders. About 127 legal proceedings have been initiated, as per information available from the finance ministry. Information from the Panama Papers, Paradise Papers and Pandora Papers leaks are also being investigated by special teams.
Globally, what is the latest effort?
The Organisation for Economic Co-operation and Development (OECD), in a report presented to G20 leaders, proposed an international treaty under which digitalized national real estate ownership registers can be established, which would be accessible to government agencies in real time. This model of connected national registers has been proposed particularly for real estate because current global efforts for tax transparency and compliance are more focused on financial asset holdings.
How will the direct access model work?
OECD has highlighted an increase in cross-border holding of real estate assets. Regulatory agencies can raise queries on a designated portal. In India, local property transactions reported by the sub-registrars form part of the taxpayer’s annual information statement. The returns also require a person to report foreign assets. Getting independent information on this is expected to help promote compliance. Once the extent of assets is known, tax officials can determine if the income is understated.
