Pranab calls for global action to end era of banking secrecy
Finance Minister Pranab Mukherjee on Sunday called for stepping up multilateral cooperation to end the era of banking secrecy and deal with the "abusive" transfer pricing mechanism that is robbing developing nations of their scarce natural resources.delhi Updated: Jun 13, 2011 15:45 IST
Finance Minister Pranab Mukherjee on Sunday called for stepping up multilateral cooperation to end the era of banking secrecy and deal with the "abusive" transfer pricing mechanism that is robbing developing nations of their scarce natural resources.
Mukherjee, while addressing a seminar on international taxation jointly organised by his ministry and the Organisation for Economic Cooperation and Development (OECD), regretted that the banking system is still opaque in various non-tax and low tax jurisdictions.
Despite efforts made at the global level and statements issued by G-20 leaders at their London summit in April, 2009, "We cannot say with certainty that the bank secrecy is over in all cases", the minister said.
"While the countries have accepted to end bank secrecy in general, come countries have agreed to do so only from a prospective date and are not willing to exchange past banking information," Mukherjee said.
Such issues put a question mark on the efficacy of the present legal provisions for exchange of banking information, he said, adding, "There is an urgent need to revisit the existing legal framework developed by the OECD in this regard".
The OECD is a 34-member grouping of developed and developing countries and has been playing a key role in reforming the international taxation system.
Referring to the issues concerning transfer pricing, the minister said, "This abusive behaviour is robbing developing countries of their scarce resources, which is required for financing development programmes."
The rising number of disputes in international tax matters is an area of concern, Mukherjee said, adding that due to linkages with the global economy, the tax disputes are not just bilateral in nature, but have assumed a multilateral character involving multiple countries.
The minister said, "These challenges of the new global environment will have to be addressed through bilateral and multilateral cooperation."
India has initiated the process of re-negotiation of tax pacts with 65 countries to broaden the scope of provisions governing the exchange of banking information and information without domestic interest.
So far, India has finalised 14 Tax Exchange Information Agreements (TIEA) and concluded talks on Double Taxation Avoidance Agreements (DTAAs) with 36 countries in 2010-11.
He indicated that the international community may also have to think of a multilateral tax convention to address the issue, as experience clearly shows that non-resolution of disputes leads to unending litigation.
About the tax havens, Mukherjee said that tax competition driven by the presence of tax havens has created an unhealthy situation, aiding individuals in parking substantial undisclosed income outside their countries.
Mukherjee said the emphasis of cooperation has to be on professional and skill upgradation both in tax administration and in industry.
"In this context, the efforts of the OECD to organise this conference are an important and timely contribution," he said.