India Expands Information Exchange Network

The Central Board of Direct Taxes ("CBDT") has undertaken a series of measures to strengthen the functioning of its international tax wing and its overseas units, directed to building robust information framework and to prevent tax evasion using low tax jurisdictions.

Background

The CBDT, which is the apex body for revenue administration for direct tax in India, has been initiating measures to deepen its information backbone and its enforcement mechanisms to curb practices of tax evasion and siphoning of funds from India. In the same direction, the CBDT has announced further steps being taken such as secondment of personnel to top world economic body Organization for Economic Co-operation and Development ("OECD"), initiation of income tax overseas units and deputation to foreign tax research wing.

Secondment to OECD

The CBDT has now announced that senior Indian Revenue Services ("IRS") officers would be seconded to certain key international posts such the following:
· To OECD as Advisor, Exchange of Information and Tax Crimes and Other Crimes;
· To OECD as Advisor, Transfer Pricing; and
· To Global Forum for Transparency and Exchange of Information for tax matters.
As a part of this arrangement, the officers would interact with tax authorities of other countries and gain expertise to tackle the issue of tax evasion using the tax havens.

Income-tax Overseas Units

The income tax department had established its overseas units in Singapore and Mauritius with effect from May 2010. In addition, the CBDT had announced that senior IRS officers would be deployed to eight other overseas Income Tax units which are to be set up shortly. In addition to the above, the human resource development department of CBDT had earlier announced its posting policy for deputation to the overseas unit. The CBDT had announced that it has received 54 applications for postings at eight overseas units as on February 8, 2011.

Deputations to Foreign Tax and Tax Research Wing

The Income-tax department has also taken steps for posting two additional senior officers as 'Officers on Special Duty' with the Foreign Tax and Tax Research wing of the CBDT. The wing was established to deal with tax research relating to direct tax laws in India and abroad, tax treaties and exchange of information and matters relating to the tax liability of non-residents and other foreigners.

Comments

In the recent times, estimates of unaccounted money deposited in secret overseas bank account have been an issue of debate in the polity and public space. Over the years, the Government has taken steps to equip itself to deal with this serious issue. As a part of its initiative, the CBDT had entered into series of Tax Information Exchange Agreements ("TIEA") with various countries / territories.

The deepening of its overseas units and secondment to key international posts appear to be steps of the overall strategy of gathering information, understanding issues by interacting with the global economies and to occupy positions to positively influence the policy making bodies. These initiatives augur well for the nation facing the menace of unaccounted monies and it would also place India as an important nation in international fiscal affairs.

Written by Vikrant Pangam