Union Finance Minister Arun Jaitley has said that the world is increasingly moving towards a more structured and organized struggle against illegal money parked in tax havens or even otherwise transacted at foreign soil. Originally the tax havens were completely non-cooperative. However, international pressure has compelled some of them to relax the rigidity against non-disclosure.
He further said that almost all countries which entered into Double Taxation Avoidance Treaties or have a domestic legislation, as in the case of US, that has an extra-territorial application insist that information parted to the receiving State would be subjected to confidentiality clauses. The confidentiality clauses make it incumbent that disclosure would be made only after prosecution is filed before a charging court. Thus the issue is not whether but when disclosure can be made.The debate is not between disclosure and non-disclosure of confidential information. It is between unauthorized disclosure in violation of tax treaties and disclosure as per tax treaties.
A disclosure in violation of tax treaties helps the account holder. The reciprocating state would treat this as a violation of a tax treaty and refuse to provide any evidence in support of the unauthorized account. The holder of the unauthorised account in the absence of any proof and confirmation from the reciprocating State would get the benefit in any investigation or prosecution and then claim that "I stand vindicated". In fact, a pre-mature disclosure would additionally alert the account holder to prepare some documentation or a sham defence. It may even enable him to destroy evidence.
Jaitley further added that India has to take a conscious call. Does it want to be a part of the global coalition which is moving in the direction of automatic sharing of information or not? Does it ensure all information is supported by substantial evidence and proof or only wishes to remain restricted to sloganeering? In the recent meeting of about 50 countries in Berlin which proposed automatic sharing of information, India could not participate since a prevalent view is that confidentiality clauses are unconstitutional in Indian law. This view requires reconsideration.
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