India Seeks to Reopen Panama Channel to Dig up Dirty Money
Talks for exchange of data to be restarted; tax haven may be named a ‘non-cooperative jurisdiction’ if accord not achieved
New Delhi: Following the Panama Papers leak, India is seeking to restart talks with the Central American country on a Tax Information Exchange Agreement (TIEA) that can help uncover information on wealth hidden away from public scrutiny. Talks with Panama on such an agreement aimed at information exchange on tax offenders have been stalled since 2013.
“Efforts have begun to restart negotiations for TIEA,” said an official aware of the matter, indicating the urgency over reaching an agreement in the wake of the leak. The Panama Papers were released earlier this week.
Voyage To Panama Talks with Panama on TIEA had stalled in 2013 TIEA to facilitate active exchange of information Panama yet to comply with OECD transparency guidelines It is yet to sign multilateral convention on exchange of tax info
The details were made public by the International Consortium of Investigative Journalists in collaboration with several news organisations around the world and contains names of nearly 500 Indians, including celebrities and industrialists who had allegedly set up offshore entities in various tax havens. The leaked data came from the Panamanian law firm of Mossack Fonseca that helped set up offshore companies. India can name Panama a ‘non-cooperative jurisdiction’ if it doesn’t reach an accord on the matter, officials said. The consequence of such a classification is that India can levy a higher withholding tax of 30% on all payments made and allow no deductions of expenditure and allowances while computing tax in respect of transactions with any entity from that country.
India has already exercised this option in the case of Cyprus.
Most of the accounts that have been reported as part of the Panama Papers have links to entities in jurisdictions with which India has agreements, the British Virgin Islands for instance. India also plans to use exchange agreements with these jurisdictions to get information on these entities besides using global fora such as the Financial Action Task Force.
Finance Minister Arun Jaitley has warned that those with illegal accounts will be pursued. The government has set up a multi-agency group to probe the offshore accounts connected to Indians and mentioned in the Panama Papers. Panama has not joined the global the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention). The Organisation for Economic Co-operation and Development has singled out Panama as the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities. India has signed TIEAs with a number of financial centres or tax havens, including British Virgin Islands, Cayman Islands, Isle of Man, St Kitts & Nevis and San Marino. As many as 15 TIEAs are in force and such pacts are being negotiated with 28 countries and jurisdictions.