Under attack for inaction over black money allegedly stashed away in secret banks in overseas tax havens, finance minister Pranab Mukherjee on Monday proposed a five-fold strategy to deal with the menace.
“The generation and circulation of black money is an area of serious concern. To deal with this problem effectively, the government has put into operation a five-fold strategy which consists of joining the global crusade against black money,” Mukherjee said in his Budget speech.
Contrary to expectations, Mukherjee did not announce any amnesty scheme for tax offenders to disclose concealed income. The government’s five point strategy on black money include joining global crusade against black money, creating an appropriate legislative framework, setting up institutions for dealing with illicit funds, developing systems for implementation, and imparting skills to manpower for effective action.
“To strengthen controls over prevention of trafficking and improve the management of narcotic drugs and psychotropic substances, I propose to announce a comprehensive national policy in the near future,” Mukherjee said.
The finance minister said that India secured the membership of the Financial Action Task Force (FATF) in June last year.
“This is an important initiative of G20 for anti-money laundering. We have also joined the Task Force on Financial Integrity and Economic Development, Eurasian Group (EAG) and Global Forum on Transparency and Exchange of Information for Tax Purposes,” he added.
The government has also appointed a group to look into an amnesty scheme to tax offenders.
The last such offer — Voluntary Disclosure of Income Scheme (VDIS) — was introduced in the Budget 1997-98.
The government will also upgrade transfer pricing norms to match the global standards and prevent tax evasion through manipulative invoicing.
These norms will be based on recommendations made by a committee formed by the directorate general of international taxation. The committee will submit its report by March this year.
Under transfer pricing mechanism, money is transferred from one jurisdiction to the other at a specified rate for goods and services exchanged between related entities. Multinational companies use transfer pricing to minimise their worldwide taxes, duties and tariffs.
In the past 18 months the Directorate of International Taxation has collected taxes of R34,601 crore and directorate of transfer pricing has detected mis-pricing of Rs33,784 crore, which has prevented shifting of an equivalent amount of money outside India. What is black money?
The Supreme Court has pulled up the government for witholding information on black money stashed in foreign banks, saying it is not just limited to tax evasion but a “mind boggling crime” amounting to “theft” and “plunder” of national wealth having security ramifications. How people avoid paying tax
The Supreme Court said it was unhappy that the government filed an affidavit restricting information relating to the money deposited by 26 people in Liechtenstein Bank in Germany.