Informative, Innovative and Interactive Site of MP & Chhattisgarh
Un Site Informatif, Innovatif et Interactif de MP & Chhattisgarh

“It is not right in God’s sight to obey men rather than God.”

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 caveats.

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.