Central Board of Direct Taxes feels black money recovery difficult
A senior officials say they have no legal jurisdiction over the accounts maintained in foreign countries and governments there can cooperate only in case of established criminal conspiracy
While the government has threatened rigorous action against black money hoarders after tepid response to its one-time compliance window, it may have limitations in recovering illegal money stashed overseas.
A senior Central Board of Direct Taxes (CBDT) official told dna, “We so far have no legal jurisdiction over the accounts maintained in foreign countries. Foreign governments can only cooperate in the event of established criminal conspiracy.”
A former director general of income tax told dna, “The arm of Indian law does not extend beyond Indian shores. The Indian authorities have to approach foreign governments and their judiciary for cooperation. It would require a lot of ground work and clear-cut information about respective suspects.”
dna has learnt that even in criminal cases government had faced various legal hurdles due to prescribed provisions of the existing enforcement laws, which deal with money laundering and violation of foreign exchange.
For instance, in the case of Indian businessman Hasan Ali Khan, who reportedly had a Swiss bank account with $8 billion in deposits, the government was not able to recover alleged unaccounted money.
Further, some countries and tax havens which have now initiated exchange of information about Indians’ undeclared assets would not have help much in nailing tax evaders as they does not provide any backdated information.
“The new lists provided by the countries are just the recent data, which does not have the earlier transactions details. The data has transaction of up to a year and not from the start,” said an assessing officer aware about the development.
On the other hand, the I-T department recently shared details of US citizens’ assets in India with the US Internal Revenue Service and is expecting similar details about Indians’ unreported assets in the US.
Even the Swiss government, which initially said it would not share details of bank account holders with India if information is sought based on what it called the ‘stolen’ list of HSBC account holders, subsequently agreed to change its domestic law to assist India’s probe.
Going ahead, loopholes in the law itself is a major challenge before tax authorities.
“Companies promoters and high net worth individuals have no fear of any said laws and penal actions. They know how to test or misuse the loopholes in the laws for foreign direct investments, external commercial borrowing, import- export remittances etc,”said an IT official.
According to legal experts, black money holders are in risk-taking mode. Moreover, they know about the benefits of double tax avoidance agreements, which can help taxpayers to get relief from double taxation on the same income.
Sujoy Kantawala, senior advocate, said, “If a person has taken efforts and made expenses to keep the money out, which is relatively safe and under his control, why should he bother to bring it back? The scheme had good intentions but people are scared and sceptical.”
Even the government has accepted that catching such illegal money from overseas is not easy. Revenue secretary Hasmukh Adhia said, “Yes we have our own limitation,” when asked about the options available with government for tax evaders who skipped the compliance window.
“The idea of the compliance window was not at all practical. That is why the recovery we got is just the tip of iceberg. The government acted in a bullheaded manner by asking for details of bank accounts. Then it was not offering blanket amnesty as such. The sword of investigation would have been hanging on the associates of the declarants,” said the former DG, income-tax.
He said, “Ideally, the government should have sought declaration of existing assets and payment of tax there on. Then lakh of crores of money would have been disclosed. The government advisors clearly goofed up on this after making tall promises.”
