India signs international tax treaty

The pact will help it to curb tax evasion and trace black money stashed away abroad

January 29, 2012 04:43 pm | Updated November 17, 2021 05:09 am IST - NEW DELHI

In yet another move to get information about black money stashed away abroad, India has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, a multilateral agreement that promotes international cooperation while respecting the rights of taxpayers.

This will send a strong signal that India and the other 31 signatory countries have joined hands to ensure that individuals and multinational enterprises pay the right amount of tax, at the right time and in the right place. The Convention provides for administrative cooperation among the parties in the assessment and collection of taxes, with a view to combating tax avoidance and evasion, according to a statement by the Organisation for Economic Cooperation and Development (OECD) here.

With taxpayers increasingly operating on a global basis, tax authorities are moving from bilateral to multilateral cooperation and from exchange of information on request to other forms of cooperation. The convention is an effective and practical tool to help tax authorities in their everyday work. “India has moved very quickly since its commitment to the Convention at the November 2011 G20 ceremony in Cannes and I expect it will be the first non-OECD G20 country for which the updated Convention is in force,” said Jeffrey Owens, Director of the OECD Centre for Tax Policy and Administration.

Signatories to the amended Convention are: Argentina, Australia, Belgium, Brazil, Canada, Denmark, Finland, France, Georgia, Germany, Iceland, India, Indonesia, Ireland, Italy, Japan, Korea, Mexico, Moldova, the Netherlands, Norway, Poland, Portugal, Russia, Slovenia, South Africa, Spain, Sweden, Turkey, Ukraine, the United Kingdom, and the United States.

The Convention was signed by Sanjay Kumar Mishra, Joint Secretary, Foreign Tax and Tax Research Division, Department of Revenue, in the presence of Deputy Secretary-General of OECD Rintaro Tamaki. This instrument hitherto available for members of the OECD and the Council of Europe was amended in 2010 and made open for all countries in June 2011.

Wider network

The Convention was amended to respond to the 2009 G20 Summit call for developing a broader multilateral approach to improve the effectiveness of exchange of information, cooperation among the countries in the assessment and collection of taxes, with a view to combating tax avoidance and evasion. Many more countries are expected to sign the Convention. This provides for a wider network of countries cooperating in exchange of information, assistance in tax collection.

The convention is based on international standard of transparency and exchange of information. This instrument is multilateral and a single legal basis for multi-country cooperation as against the DTAAs/TIEAs which are bilateral. It provides for an extensive network and there will be consistent application of provisions, leaving limited scope for deviation. It provides extensive forms of cooperation among the signatories on all taxes. It not only facilitates the exchange of information, but also provides for assistance in the recovery of taxes. This will give a fillip to the efforts of the government to bring back Indian money illegally stashed away abroad.

Tax examinations

The convention provides for simultaneous tax examinations and participation in tax examinations in other countries. It provides for examination of tax affairs of the taxpayers simultaneously in their own territory and share the relevant information with each other.

This allows tax officials to enter into the territory of the other country to interview individuals and examine records. It also provides for automatic exchange of information, spontaneous exchange of information and exchange of past information in criminal tax matters.

The information received under the convention can also be used for other purposes besides those related to tax cooperation, such as countering money laundering, with the approval of the supplying state.

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