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'India gets leg into Bermuda tax havens'

February 22, 2010 16:35 IST

For Jeffrey Owens, head of taxation at Paris-based Organisation for Economic Cooperation and Development (OECD), India concluding its first-ever tax information exchange agreement (TIEA) with Bermuda is a major victory in the battle against tax evasion.

The agreement, which was concluded during the visit of Bermuda premier Ewart Brown, enables India to conform to the OECD standards on sharing tax information. The Cambridge-educated economist had played a key role in getting the G-20 to move on this front at the London Summit last year.

Owens, who was in New Delhi recently for a meeting of the Steering Group of the Global Forum on Transparency and Exchange of Information for Tax Purposes, spoke to Rohit Bansal of India Strategy Group. Excerpts:

What has been India's role in the counter-attack against tax havens?

India, which is both a member of the Global Forum's Steering Group and a vice-chair of its Peer Review Group, has played an active role to ensure that high standards of transparency and exchange of information are in place throughout the world to prevent tax evasion from depriving governments of resources for development.

What came out of the New Delhi meeting?

The Steering Group, which guides the work of the Global Forum, considered the core documents required to launch the peer review process. It also examined the progress of the Global Forum on the mandate given to it by the G-20 in November 2009. Besides OECD, the meeting, chaired by Australia, was attended by the US, Japan, China, the UK, Germany, France, South Africa, Brazil, South Africa, Singapore. Bermuda and the Cayman Islands.

What is the state of play in India regarding TIEAs?

India has been at the centre of the Global Forum's work to build the peer review process. Your finance minister, in his welcome message to the Steering Group, committed to the Global Forum's work and our ability to capture the needs of the developing countries. Indeed, as he said, tax plays a crucial role in helping developing countries mobilise their domestic resources and enforcing high standards of transparency. Exchange of information will be an important part of this strategy.

How far has India progressed on TIEAs?

I was informed that India has concluded its first TIEA complying with OECD standards. We understand that the announcement of this first agreement with Bermuda is now just a matter of days. We have been told that one more TIEA is to follow soon.

Bermuda accounts for a significant part of foreign direct investment into India. Some banking investments there have been cited as controversial.

A tax information exchange agreement will give OECD-mandated exchange to Indian tax authorities and their requests in cases of special inquiries will be better equipped to tackle tax evasion.

Critics argue that one agreement at a time allows evaders all the time in the world to move their money.

Three hundred such agreements have been signed in the last one year. That's a huge movement from where we were. OECD believes that the era of banking secrecy has begun to end. India, too, will benefit when a web of such treaties is available.

What about results?

Expect the first results by the year-end.

But the Swiss decision to walk off on the treaty with France...

We refuse to be discouraged by this.

How important is the role of non-OECD countries?

It is encouraging to see large developing economies like China, India, South Africa, and Argentina making progress. Developing countries will play a lead role in this exciting development that potentially unleashes the incentive for honest people to pay taxes.

But the "upper club" can simply move its money around.

Yes, the "upper club" has many options to move around, but as more and more jurisdictions enter into these agreements, very few out are choosing to remain ostracised.

How can India maximize benefits from TIEAs?

We are impressed by the investments being made by India in upgrading its revenue staffing and resourcing to reap the benefits of the OECD gold standards. We also expect that India will use the provisions to upgrade its double taxation avoidance agreements, specially those where a review otherwise is potentially difficult.

What next?

The next priorities are speeding up the negotiation process, enhancing the engagement of developing countries and implementation of the agreements. These will start happening when the peer review process starts.

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