Narendra Modi gets G-20 endorsement to bring black money back, tax avoidance
BRISBANE: Driven by a strong domestic political agenda
of getting black money back home, Prime Minister Narendra Modi on Sunday
managed to get the Group of 20 include a certain clause in the final Leaders’
Communiqué that will make it difficult for tax havens to give complete tax
exemption to companies.
This, along with the G20’s endorsement of a global
Common Reporting Standard for automatic exchange of tax information on a
reciprocal basis, are the twin pillars in India’s fight against tax evasion and
repatriating unaccounted money, said Suresh Prabhu, sherpa to Prime Minister
Modi for the G20 Summit.
Prabhu said that the Prime Minister made a strong
pitch against black money. “At present, there are many rigidities in
international tax laws, and past tax treaties also do not facilitate easy
exchange of information,” he said. India has to make specific requests with tax
jurisdictions for information, and more often such information is shared with
The Prime Minister’s Office said that India’s concerns
on black money and tax avoidance have been taken on board in G20. This,
government officials said, would give an impetus to India’s move to renegotiate
treaties with some countries.
On the implication of the clause that now commits the
G20 to ensure ‘transparency of taxpayer-specific rulings found to construe
harmful tax practices’, Usha Titus, Joint Secretary, Ministry of Finance,
pointed out that Luxembourg, for instance, had given a series of rulings which
effectively did not require certain corporates to pay any tax. “The inclusion
of this clause will make it difficult for tax havens to do so for specific
corporates,” she said.
This is part of the base erosion and profit shifting
(BEPS) action plan of the G20/ OECD to modernise international tax rules. The
G20 final draft said that this plan has made significant progress. “We are
committed to finalising this work in 2015,” it said. The G20 countries are
expected to exchange information with each other and other countries by 2017 or
end-2018 after completing legislative procedures.
Modi has been pushing the issue of black money in his
meetings with global leaders including Japanese Prime Minister Shinzo Abe and
the BRICS leaders. At an informal meeting with BRICS leaders Dilma Rousseff of
Brazil, Xi Jinping of China, Vladimir Putin of Russia and Jacob Zuma of South
Africa, Modi called for close coordination on unaccounted money stashed abroad.
He said unaccounted money was also linked to security challenges.