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Rediff.com  » Business » Disclose black money kept abroad and pay less penalty!

Disclose black money kept abroad and pay less penalty!

By Vrishti Beniwal
Last updated on: September 15, 2011 13:29 IST
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The finance ministry is considering a scheme to allow Indian citizens to voluntarily disclose money stashed in tax havens abroad.

The proposed scheme will not provide immunity to tax defaulters. They will escape prosecution but will pay a penalty lower than normally levied for tax evasion.

The move comes after India Inc suggested the repatriation of such undisclosed income would make more funds available for investment in India's growth.

At a meeting with finance minister Pranab Mukherjee last month, industry captains suggested if all the money parked abroad was brought back, there would be more to invest in infrastructure projects.

"They said some form of incentive should be there through disclosure schemes to bring back black money kept in tax havens," said a finance ministry official, who did not wish to be identified.

The idea of a voluntary disclosure of income scheme was conceived last year by an expert group constituted by the finance ministry.

However, at that time no action was taken as the government did not have the tools to get information on such secret accounts.

The process has been revived as the finance ministry now feels better equipped in the light of some recent developments such as the Organization of Economic Cooperation and Development convention on automatic sharing of tax-related information, information under tax information
exchange treaties and double taxation avoidance agreements and setting up of overseas tax units.

"At that point, it was felt that since the information on such bank accounts was not readily available this scheme would not serve any purpose. Now such information is forthcoming and the time has arrived to reconsider our options," said another finance ministry official.

Voluntary disclosure schemes are currently available in many countries such as the United States, the United Kingdom, Germany, France, Greece, Italy and Portugal.

A voluntary disclosure of income scheme was launched by the finance ministry domestically in 1997 and it helped the government increase revenue collections dramatically.

Under the new scheme, the government may not ask a person the source of the money, but criminal action would be taken if it is proved the money was earned though unlawful activities.

As a member of the Financial Action Task Force, India cannot grant amnesty to people who collect black money as proceeds from crime.

The officials said if a minimum penalty was imposed, a person would still be able to save a portion of the unaccounted money kept abroad.

Currently, a penalty of 100 to 300 per cent of the tax rate is levied on non-disclosure of overseas assets and income.

So, if a penalty of 100 per cent is imposed on taxable income at 30 per cent, one would be able to retain 40 per cent of the money.

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Vrishti Beniwal in New Delhi
Source: source
 

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