Most In­di­ans’ Panama A/cs may be Via Le­gal Chan­nel

Ini­tial in­quiries sug­gest 90% have used RBI’s lib­er­alised re­mit­tance scheme

The Economic Times - - Front Page - Deepshikha.Sikar­war @times­

New Delhi: Pre­lim­i­nary in­quiries into ac­counts of about 500 In­di­ans fea­tur­ing in the Panama Papers don’t ap­pear to in­di­cate large-scale wrong­do­ing, with most in ac­cor­dance with Re­serve Bank of In­dia (RBI) rules, a gov­ern­ment of­fi­cial said. “About 90% of these ac­counts have used RBI’s lib­er­alised re­mit­tance scheme (LRS) but the rest should be pre­pared to face the music,” he said, un­der­scor­ing the gov­ern­ment’s in­tent to take ac­tion against those who didn’t use last year’s one-time amnesty be­fore In­dia’s strin­gent black money law kicked in.

The Panama Papers re­fer to 11.5 mil­lion doc­u­ments leaked from Mos­sack Fon­seca, a law firm in the Cen­tral Amer­i­can coun­try spe­cial­is­ing in set­ting up off­shore com­pa­nies that can be used to con­ceal wealth. INI­TIAL FIND­INGS

Large num­ber of ac­counts could be le­gal

Funds flow likely un­der the RBI’s re­mit­tances scheme

Amount can be used to pur­chase im­mov­able prop­erty, in­vest in equity or debt Au­thor­i­ties to turn the heat on those found in vi­o­la­tion Agen­cies to tap info from other co­op­er­a­tive tax havens

In­dia seek­ing to restart talks with the Cen­tral Amer­i­can coun­try on tax info ex­change pact

The leak led to the res­ig­na­tion of Ice­land’s prime min­is­ter as sev­eral global lead­ers found their fi­nances un­der pub­lic scru­tiny, par­tic­u­larly with re­gard to source of in­come. RBI Gover­nor Raghu­ram Ra­jan had cau­tioned against jump­ing to con­clu­sions last week.

“It is im­por­tant to note that there are le­git­i­mate rea­sons to have ac­counts out­side,” he had said. RBI is part of the multi-agency team set up by the gov­ern­ment to in­ves­ti­gate the names that fig­ure in the list. The team also in­cludes the Cen­tral Board of Di­rect Taxes and the Fi­nan­cial In­tel­li­gence Unit.

In­di­ans can legally open bank ac­counts over­seas with tax-paid in­come sub- ject to lim­its. Trans­fers are per­mit­ted un­der LRS, which was in­tro­duced in 2004 with a cap of $25,000, since raised to $2,50,000 (Rs 1.63 crore). Re­mit­tances up to that amount are al­lowed by a res­i­dent in­di­vid­ual in a fi­nan­cial year for any per­mit­ted cur­rent or cap­i­tal ac­count trans­ac­tion or a com­bi­na­tion of both. Undis­closed ac­counts will face ac­tion un­der the black money law deal­ing with undis­closed for­eign as­sets that was in­tro­duced last year. About $1.3 bil­lion was trans­ferred out of the coun­try in FY15 through LRS, which al­lows the pur­chase of im­mov­able prop­erty, in­vest­ment in equity and debt, and do­na­tions and gifts among oth­ers. About $250 mil­lion was used for the pur­chase of prop­erty and in­vest­ment in shares and debt.

In the decade to FY15, over $8 bil­lion went out through this route, a sub­stan­tial per­cent­age of which was used for tu­ition fees and main­te­nance of close rel­a­tives. The Panama Papers in­cluded the names of nearly 500 In­di­ans, in­clud­ing celebri­ties and in­dus­tri­al­ists, who are said to have parked funds in off­shore ac­counts in trans­ac­tions bro­kered by the law firm. The doc­u­ments were re­leased by the In­ter­na­tional Con­sor­tium of In­ves­tiga­tive Jour­nal­ists (ICIJ) in as­so­ci­a­tion with var­i­ous me­dia or­gan­i­sa­tions around the world on April 3. The ICIJ added a dis­claimer that there are “le­git­i­mate uses for off­shore com­pa­nies”.

Tax au­thor­i­ties will seek in­for­ma­tion from other ju­ris­dic­tions listed in the Panama Papers with which In­dia ex­chang- es in­for­ma­tion as part of bi­lat­eral or global treaties. FM Arun Jait­ley has warned that gov­ern­ment agen­cies will go af­ter those with il­le­gal ac­counts.

Off­shore ac­counts have long been as­so­ci­ated with black money. Be­fore the 2014 elec­tion that brought it to of­fice, the Bharatiya Janata Party had promised a crack­down on black money and off­shore ac­counts. Soon af­ter tak­ing over, the Naren­dra Modi gov­ern­ment set up a spe­cial in­ves­ti­ga­tion team to in­ves­ti­gate black money and in­tro­duced a new law to deal with undis­closed as­sets over­seas. The com­pli­ance win­dow that pro­vided a chance to come clean on such as­sets had met with a luke­warm re­sponse – a to­tal of 644 dec­la­ra­tions were made, yield­ing Rs 2,428.4 crore in tax.

Multi-agency probe into Panama Papers go­ing full throt­tle In­ves­ti­ga­tions into over 500 In­dian ac­counts re­vealed in a global ex­pose

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