UIIC AO 2016 – Essay – Indian Government’s role in Tax Haven

Arya Stark – Indian Government’s role in Tax
Haven

Tax havens refers to a
country or state or territory which maintains a system of financial secrecy
which enables the foreign individuals to hide their assets or income to avoid
or reduce taxes in the home jurisdiction. This creates a situation of tax
competition among the jurisdictions. It may be specific government’s policy to
encourage inflows from tax havens.

Even Indian government is
encouraging foreign entities to invest their money in India. This is benefiting
India’s stock markets & helping the country to meet it’s current account
deficit. Today, India have double taxation treaties with many countries. This
enables many companies to legitimately pay lower tax in one country & to
avoid high tax in another country. Mauritius is famous because it has zero tax
on certain types of income & India have double taxation avoidance treaty
with that country.

Here, India is creating tax
haven, not Mauritius. Tax havens exist in India as well. When a politician
demands a special status for his state, it means that he is demanding that his
state should become a tax haven for domestic and global investors in order to
develop faster. Recently, the expose of panama papers created a storm across
the world. The supreme court of India ordered to form a special investigation
team includes officers of CBDT, foreign investment unit, RBI and others to
investigate into this matter. Indian government announced to punish those who
are involved illegally in this.

Tax havens have been
criticized because they often result in the accumulation of idle cash which is
expensive & inefficient for companies to repatriate. Many tax havens are
thought to have connections to fraud, money laundering & terrorism.
Therefore, on one side India is creating tax havens for faster development and
on another side, India is facing a challenge to avoid the flow of tax evaded
money.

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Ghost – Indian Government’s role in Tax
Haven

Tax haven is a country where
foreign investors or businessman are offered little or no tax under
economically and politically stable environment. These institutions share
negligible personal information to foreign tax authorities. The facilities are
such that they assure guaranteed opaqueness and no disclosure of personal
information. The threats those are posed by tax havens include uneven
development which refers black money if invested will go to few sectors and
mainly government revenue is affected due to illegal evasion of tax. Finance
Minister of India Mr. Arun Jaitley has joined G20 meeting to curb tax evasion, terror
financing and money laundering and thus warned those tax havens to be
transparent in this regard and show information. The G20 meeting, Finance
minister of India Arun Jaitley and The RBI governor Mr. Raghuram Rajan from
India, is about to take “defensive” steps against tax evaders. India
does not have official estimation regarding the amount stashed away by its
nationals abroad but unofficial estimates assume the amount between $466
billion and $1.4 trillion. India and Mauritius have signed their three-decade
old treaty to restrain tax haven. In upcoming future days, investments from
Mauritius to India will have to weigh to pay zero to twenty per cent interest
as CAPITAL GAINS tax depending upon the setting of new industry or business as
per the treaty. In near future India is going to tighten the rules and
regulations to curb tax evasion and is going to apply such rule that offshore
dealings can claim capital gains tax. It can be envisaged by our nationals to
make void the future of tax havens and tax evaders as well.