Fifty one countries sign agreement to tackle black money
Fifty-one countries and jurisdictions signed a treaty in Berlin Wednesday to start automatic information exchange by 2017 or 2018 onwards. Aiming to access information about offshore holdings of its citizens more easily, these countries came together in what is being seen as a first step in an important global effort for increased transparency.business Updated: Oct 31, 2014 11:49 IST
Fifty-one countries and jurisdictions signed a treaty in Berlin Wednesday to start automatic information exchange by 2017 or 2018 onwards. Aiming to access information about offshore holdings of its citizens more easily, these countries came together in what is being seen as a first step in an important global effort for increased transparency.
Who has signed and who hasn't
Conspicuous by its absence was India, who was not part of this group of signatories that include emerging economies such as South Africa and Argentina joining the OECD (Organisation for Economic Co-operation and Development) countries such as France, Germany and the United Kingdom.
Some countries that have traditionally been seen as banking secrecy jurisdictions or tax havens also signed on and this includes Austria, Liechtenstein and Cayman Islands. Mauritius has also signed the agreeement. Switzerland, which had committed as an early adopter, hasn’t yet signed.
Why would a country not sign the agreement?
Low income countries who do not have the wherewithal to collect information won't be able to sign because reciprocity is a condition. If they cannot give info under the automatic system, they cannot get info except using older methods.
Tax havens would be reluctant to give information so they won't sign this agreement. Or if a country doesn't need to information, it will not sign. None of the above apply to India.
The OECD told HT that it could not comment on why India couldn't sign but said that the agreement remains open so more countries, including India, can still sign it. It remains unclear however as to why India was unable to participate in this big signing since it had committed to early adoption.
Why is multilateral framework better than bilateral treaties?
In September, the OECD presented a new standard whereby countries signing treaties will be provided exchange of all financial information on an annual basis, automatically. 90 countries, including India, committed to early adoption.
The "Multilateral Competent Authority Agreement" (MCAA) which will activate the automatic exchange of information is a framework that provides a standardized set of rules. It will provide for first information exchanges by September 2017.
Bilateral treaties, on the other hand, are also an option but would need more time and resources and also leave the scope for countries shielding wrongdoers to haggle over the terms. India and Switzerland have been wrangling over such issues for many years.
Andres Knobel of the Tax Justice Network told HT the MCAA is "not enough but necessary" for countries looking to retrieve information on overseas accounts.
When will India join the global fight against black money?
Finance Minister Arun Jaitely recently said India was going to start discussing a bilateral treaty with Switzerland for automatic information exchange. It's not clea yet if such discussions have been initiated with other countries as well.
For the moment India is preoccupied with the controversy over two lists of names from European whistleblowers. But those backing automatic exchange of information have argued that it will free authorities from being dependent on "stolen data" to extract information.