The key to addressing the issue of tax evasion and black money is better cooperation internally as well as globally, says Jeffrey Owens, Director, Centre for Tax Policy and Administration, Organisation for Economic Cooperation and Development, in an interview with Vrishti Beniwal.Edited excerpts:
How do you look at India's efforts in handling tax evasion and black money?
India now has 14 Tax Information Exchange Agreements and it has been negotiating 30 Double Taxation Avoidance Agreements.
That is remarkable in such a short time.
Clearly, there is a lot of political push and willingness by the revenue service to get these agreements in place.
There is a clear message going to Indian taxpayers. The time when you could use tax havens is coming to an end. There is a much higher risk of detection and there are proposals for putting heavy penalties.
I think over the next 12 months, we will see a significant change in the behaviour of Indian residents. Your government has recently formed a panel to look at illicit payments.
That is very much a right approach. We would like to work with India, both in terms of presentation to the panel and having India to work with OECD to address this broader issue.
The government is under attack from various quarters for not being able to bring back black money.
By definition, black money is difficult to deal with, because you don't know where it is, how much it is and who has it. You deal with that by a concerted government effort across various departments - justice (law), police, tax and the financial intelligence unit.
These people have to work together, first to identify the money and the people behind that and then find mechanisms to bring the funds back.
When a tax auditor, for instance, goes to a company or a high net worth individual and smell something is not right, he should be able to identify and pass on the information to the justice department.
How do you deal with non-cooperating countries?
India is not alone and many OECD countries have a major problem with money laundering, bribery and tax evasion.
No matter how big a country you are, you can't resolve the issue by yourself.
You have to have cooperation because black money may involve three-four countries and it is always easy when you move forward together. That's why we launched the Oslo dialogue. We had a meeting in March.
This is the problem we are proposing and we would be delighted if India joins us on this. Also, recognise that you need a lot of political will as well.
How do you view amnesty schemes for tax recovery?
You have to be very careful because it is penalising the honest taxpayers. It also undermines the ability of the tax administration.
Every two or three years if you are going to get an amnesty, you stop paying taxes. But if you have a situation where you have a major structural change, such as a G20 development on a tax haven initiative, at that point of time you should give an opportunity to tax evaders to come clean.
The United Kingdom, Ireland, France, Australia, Canada, the US have used it and it is working very effectively.
The programme says you have six months or nine months to pay every single penny of tax that is due and the interest on the taxes. The penalties can be discussed.
The OECD model tax convention talks about freezing and repatriation of assets between contracting states. But most countries do not follow this. How do you plan to address the issue?
In a global economy,
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