Two days ago, when we were all looking the other side, India and Switzerland agreed to exchange information on Swiss bank accounts from September, 2018 onwards. For long, Swiss banks and the illicit stash abroad have been the bone of contention. To give a sense, the recent Panama papers leak listed 1,200 Indians with HSBC bank accounts holding an accumulated $20 billion stash. This could well be the tip of the iceberg.
But unlike the demonetisation drive, it lacks punch and gives ample time for account holders to take cover, as the fi rst information exchange starts only two years later. Despite the crackdown, black money may remain abroad, unless the Indian government signs immediate information exchange treaties with other tax havens like Panama, Bahamas and Costa Rica. Tax evaders work hard to benefi t from loopholes. Often, it’s through tax havens and shell companies that black is turned white in the garb of foreign capital, or white escapes the tax axe through complex corporate holding structures.
India has done well to plug these loopholes, for the fi rst time in decades, signing tax treaties with two countries namely Mauritius and Cyprus, which together account for over 60 per cent of the total in-bound FDI proceeds into the country. Similar treaties with Singapore and others are in the pipeline. The taxation issue isn’t unique to India and even developed countries are battling the menace, notwithstanding tax treaties. Just recently, Australia has pulled up MNCs like Google, Apple and Microsoft for avoiding taxes using complex organisational structures, and that business units with high book profi ts are invariably based in Singapore that levies an enviable 17 per cent corporate tax as against Australia’s 30 per cent. The Indian government is aware and reduced corporate tax to 25 per cent in 2016, but without sunset clauses and rebates, the effective tax rate is around 28 per cent and a revision may not be out of place.