Thursday 26 May 2022
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Tax haven Seychelles to share info with India

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New Delhi — The Union Cabinet chaired by Prime Minister Narendra Modi has approved the signing and ratification of the agreement between India and Seychelles for exchange of information with respect to taxes.

The agreement is expected to stimulate the exchange of information between India and Seychelles for tax purposes, which will help curb tax and tax avoidance.

Competent authorities of this country and Seychelles can now provide assistance through exchange of information that is foreseeably relevant to the administration and enforcement of the domestic laws of two countries concerning taxes covered by this agreement.

Information received under the agreement shall be treated as confidential and may be disclosed only to persons or authorities (including courts or administrative bodies) concerned with assessment, collection, enforcement, prosecution or determination of appeals, in relation to taxes covered under the agreement. Information may be disclosed to any other person or entity or authority or jurisdiction with prior written consent of the country sending the information.

The agreement also provides for a mutual agreement procedure for resolving any difference or for agreeing on procedures under the agreement.

The agreement will enter into force on the date of notification of completion of procedures required by the respective laws of the two countries, for entry into force of the agreement.

The agreement does not have any financial implications. Only in the event of extraordinary costs exceeding $500, the Government of India will bear the same, as per Article 9 of the pact. India has similar provisions in other such tax information exchange agreements.

The Union government is authorised under section 90 of the Income Tax Act, 1961, to enter into an agreement with a foreign country or specified territory for exchange of information for the prevention of or avoidance of income-tax chargeable under the Income-tax Act, 1961. Negotiations for entering into an agreement for the exchange of information with respect to taxes were conducted at Seychelles between 8 and 9 June. Following this, India and Seychelles agreed on the text of the agreement.

India has signed similar agreements for exchange of tax information with Argentina, Bahamas, Bahrain, Belize, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Liechtenstein, Macao, Monaco and San Marino.

Tax havens of the world

Switzerland is certainly one of them. Luxembourg is a conduit tax haven, which means income from sales outside its boundary is collected and distributed here.

In Ireland and the Netherlands, the second of which is a conduit tax haven, taxes are so low and regulation so lax that they are considered semi-tax havens.

Some parts of the world are not sovereign countries, but they are permitted by their respective sovereign heads to keep the areas tax free. Jersey, Isle of Man, British Overseas Territory, Bermuda, the British Virgin Islands, Cayman Islands, Delaware and Puerto Rico (United States) are examples.

British Prime Minister had indicated in 2013 that he was no longer willing to consider Jersey, Guernsey, Isle of Man, the British Virgin Islands and the Cayman Islands as tax havens; “I do not think it is fair any longer to refer to any of the Overseas Territories or Crown Dependencies as tax havens. They have taken action to make sure that they have fair and open tax systems. It is very important that our focus should now shift to those territories and countries that really are tax havens,” he had said.

Photo courtesy: IBN
Photo courtesy: IBN

According to Tax Justice Network, rich people across the world have £32 trillion of their money stashed in tax havens. The advocacy group had released a list of these investment destinations in decreasing order of secrecy that they maintain about people who maintain accounts in these places. Here is the list:

  1. Switzerland (FSI 1765,2)
    2. Luxembourg (FSI 1454,4)
    3. Hong Kong (FSI 1283,4)
    4. Cayman Islands (FSI 1233,5)
    5. Singapore (FSI 1216,8)
    6. United States (Mainland) (FSI 1212,9)
    7. Lebanon (FSI 747,8)
    8. Germany (FSI 738,3)
    9. Jersey (FSI 591,2)
    10. Japan (FSI 513,1)
    11. Panama (FSI 489,6)
    12. Malaysia (Labuan) (FSI 471,6)
    13. Bahrain (FSI 461,1)
    14. Bermuda (FSI 432,3)
    15. Guernsey (FSI 419,3)
    16. United Arab Emirates (Dubai) (FSI 419,0)
    17. Canada (FSI 418,5)
    18. Austria (FSI 400,8)
    19. Mauritius (FSI 397,8)
    20. British Virgin Islands (FSI 385,4)
    21. United Kingdom (Mainland) (FSI 361,3)
    22. Macao (FSI 360,4)
    23. Marshall Islands (FSI 329,6)
    24. South Korea (FSI 328,7)
    25. Russia (FSI 325,2)
    26. Barbados (FSI 317,4)
    27. Liberia (FSI 300,8)
    28. Seychelles (FSI 293,4)
    29. Brazil (FSI 283,9)
    30. Uruguay (FSI 277,4)
    31. Saudi Arabia (FSI 274,2)
    32. India (FSI 254,5)
    33. Liechtenstein (FSI 240,9)
    34. Isle of Man (FSI 237,2)
    35. Bahamas (FSI 226,8]
    36. South Africa (FSI 209,7)
    37. Philippines (FSI 206,6)
    38. Israel (FSI 205,9]
    39. Netherlands (FSI 204,9)
    40. Belgium (FSI 199,2)
    41. Cyprus (FSI 198,9)
    42. Dominican Republic (FSI 193,7)
    43. France (FSI 190,9)
    44. Australia (FSI 168,1)
    45. Vanuatu (FSI 164,9)
    46. Costa Rica (FSI 157,6)
    47. Ireland (FSI 155.5)
    48. New Zealand (FSI 151,4)
    49. Gibraltar (FSI 147,8)
    50. Norway (FSI 142,7)
    51. Guatemala (FSI 142,7)
    52. Belize (FSI 129,8)
    53. Latvia (FSI 128,1)
    54. Italy (FSI 118,9)
    55. Aruba (FSI 113,3)
    56. Spain (FSI 111,3)
    57. Ghana (FSI 109,9)
    58. Curacao (FSI 106,4)
    59. US Virgin Islands (FSI 102,8)
    60. Botswana (FSI 98,9)
    61. Anguilla (FSI 96,7)
    62. St Vincent and the Grenadines (FSI 85,1)
    63. Turks & Caicos Islands (FSI 81,8)
    64. Malta (FSI 78,0)
    65. St Lucia (FSI 66,8)
    66. Denmark (FSI 63,1]
    67. Antigua and Barbuda (FSI 60,4)
    68. San Marino (FSI 59,5)
    69. Portugal (Madeira) (FSI 57.9)
    70. Grenada (FSI 55,7)
    71. Sweden (FSI 55,7)
    72. Hungary (FSI 54,6)
    73. Brunei (FSI 50,6)
    74. Andorra (FSI 43,3)
    75. Monaco (FSI 38,8)
    76. Samoa (FSI 31,0)
    77. Dominica (FSI 26,9)
    78. Cook Islands (FSI 25,2)
    79. Maldives (FSI 21,0)
    80. St Kitts and Nevis (FSI 18,4)
    81. Nauru (FSI 0,0)
    82. Montserrat (FSI 0,0)

The higher FSI, the larger influence on world economy in terms of economical secrecy or tax avoidance.

Indians have hidden away anywhere between $500 billion and $1.5 trillion in these places. The government has so far had talks with six or more of these foreign jurisdictions, including Singapore and some tax havens, for banking and other financial details of more than 500 individuals and entities that might have ‘secret offshore accounts’ at those places. According to whistleblower Hervé Falciani, whom the NDA government has approached, India has not been successful in getting more than a little fraction of information on black money that it sought from the sovereigns.

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