BUSINESS
Exchange of info resulted in detection of Rs 1,900 cr in undisclosed a/cs
Organisation for Economic Co-operation and Development’s (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes has lowered India’s rating by a notch to “largely compliant” from “compliant” in its 2013 report.
Exchange of information (EOI) is critical for India, and co-operation with its EOI partners resulted in India detecting over Rs 1,900 crore ($298,412,079) in undisclosed bank accounts and 171 prosecutions in 123 cases with respect to both the ICIJ (International Consortium of Investigative Journalists) and the HSBC cases, the report for 2017 states.
The OECD Global Forum is a multilateral framework for tax transparency and information sharing, within which over 140 jurisdictions participate. It monitors and peer reviews the implementation of the international standard of exchange of information on request (EOIR) and automatic exchange of information.
“In 2013, the Global Forum evaluated India for its implementation of the standard, against the 2010 Terms of Reference, for both the legal implementation of the standard as well as its operation in practice and concluded that India was rated Compliant overall. This second round report analyses the implementation of the standard by India in respect of EOI requests received during the period of 1 July 2013 to 30 June 2016 against the 2016 Terms of Reference. This second round report concludes that India is now rated Largely Compliant overall,” says the report.
The report was approved by the Peer Review Group at its meeting on October 5, 2017and was adopted by the global forum on November 3.While India scored ‘compliant’ rating in eight individual parameters like availability of accounting and banking information, rights and safeguards, EOIR mechanisms, confidentiality and access to information, in both 2013 and 2017 reports, it moved lower from ‘compliant’ to ‘largely compliant’ on when it came to availability of ownership and identity information, and quality and timeliness of requests and responses. “Key issues where improvement is recommended relate to the availability of beneficial ownership information and to the quality of EOI requests sent by India,” it said.
The 2016 ToR (Terms of Reference) introduced these requirements, the report said.
Under the 2016 ToR, beneficial ownership information on relevant entities and arrangements should be available in India. Beneficial ownership information is required to be maintained by financial institutions in India under AML/CFT (anti-money laundering and countering financing of terrorism) legislation. However, the implementation of this rule could not be fully ascertained in practice as comprehensive statistics were not available at this point due to time constraints regarding compliance, the report said.
The second area of improvement relates to the quality of EOI requests sent by India to its EOI partners.
A significant number of peers have indicated issues with respect to the quality of EOI requests, especially for EOI requests sent during the first half of the peer review period. India started a crackdown on tax evasion in 2011 with various legislative changes and using the EOI tool or information provided by the EOI partners under EOI agreements.
India received 298 EOIR requests during the peer review period (July 1, 2013 until June 30, 2016) in comparison with 97 requests over the previous peer review period (July 1, 2009 to June 30, 2012). Out of these 298 EOI requests, ownership information was requested in about 25% of the EOI cases (about 75 cases). On the other hand, India sent 3,787 EOI requests to its partners between July 2013 and June 2016. India sent around 10 times more EOI requests than it received. India’s main EOI partners are Belgium, Norway, the United States, Singapore and Indonesia.
“India acknowledges that the complex structures of these cases, coupled with the complicated Indian tax system and limited EOI experience at the time resulted in deficiencies in the quality of the EOI requests sent by India,” the report said.
“Although India has shown improvement in the quality of outbound requests starting from 2015 and is implementing an action plan... a number of issues remain to be addressed and monitored to ensure consistent quality of EOI requests sent by India,” it added.
A ‘Compliant’ rating indicates that the element is fully implemented with regard to the jurisdiction’s legal and regulatory framework and that framework is effective in practice.
A ‘Largely Compliant’ rating indicates that there is a material deficiency but the scope and impact of the issue has been, or is likely to be, limited in practice.
A ‘Largely Compliant’ rating is also appropriate in some cases where the implementation of the element in practice cannot be evaluated due to the lack of evidence on which to base a conclusion.
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