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DTAA black money bankruptcy code

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DTAA black money bankruptcy code

  1. 1. AGENDA (TO DISCUSS) Black Money Income Declaration Scheme ICIJ Mossack Fonseca BEPS (Base Erosion and Profit Shifting) DTAA Revised with Mauritius Bankruptcy Code 1 HARVEERSIRforGSSCORE
  2. 2. BLACK MONEY
  3. 3. # BLACK MONEY  1980 and 2007 ranges from 45% to 70% of GDP. (NIPFP)  A December 2013 report by the Global Financial Integrity (GFI), a non-profit research and advocacy organization, places India in 5th position on 'illicit financial outflows' category.  Rs.28 lakh crore (around $466 billion) was stashed away illegally in bank accounts overseas. 3 HARVEERSIRforGSSCORE
  4. 4. 4 HARVEERSIRforGSSCORE
  5. 5.  Despite several official efforts to trace and recover black money India has not registered any major success.  The Panama papers bring out yet another list of India’s rich and influential who have parked money in tax havens,  finding credible ways to verify a new estimate showing that over $505 billion (approximately Rs. 33,83,500 crore) has left India during the 2004-13 period. 5 India’s Fight against Black Money HARVEERSIRforGSSCORE
  6. 6. 6 HARVEERSIRforGSSCORE
  7. 7. All major databases on which action have been initiated have all come from foreign sources. Be it HSBC Geneva or Liechtenstein. Justice M.B. Shah, chairman of the SIT on black money, pointed out that new restrictions are in place to control misuse of export-import facilities. Strict implementation of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act 2015. 7 HARVEERSIRforGSSCORE
  8. 8.  Voluntary disclosure  The first such scheme was in 1951, which led to the collection of Rs. 10.89 crore in taxes, and there have been eight more such schemes, until 2014.  In 1997, the Voluntary Disclosure of Income Scheme was the most successful of all of them, collecting Rs. 9,745 crore in taxes.  644 declarations only The Modi government’s first major announcement was the setting up of the SIT on black money.  It followed it up with a three months compliance window between July and September 2015 under the black money Act.  It resulted in 644 declarations, totalling declaration of foreign assets worth Rs. 4,164 crore.  A total of Rs. 446 crore was collected as tax and penalty. 8 HARVEERSIRforGSSCORE
  9. 9. IDS: EFFECTIVE 1ST JUNE TO SEPTEMBER 30TH 9 HARVEERSIRforGSSCORE
  10. 10. 10 HARVEERSIRforGSSCORE
  11. 11.  Offshore bank accounts and other financial dealings in another country can be used to evade regulatory oversight or tax obligations. Often, companies or individuals use shell companies, initially incorporated without significant assets or operations, to disguise ownership or other information about the funds involved.  Panama, the Cayman Islands and Bermuda are among more than a dozen small, low-tax locations that specialise in handling business services and investments of non-resident companies.  Shell companies and other entities can be misused by terrorists and others involved in international and financial crimes to conceal sources of funds and ownership.  The ICIJ says the files from Mossack Fonseca include information on 214,488 offshore entities linked to 14,153 clients in 200 countries and territories. 11 How are offshore accounts used to evade tax obligations? HARVEERSIRforGSSCORE
  12. 12. BASE EROSION AND PROFIT SHIFTING (BEPS) By: Harveer Singh harveersinh@gmail.com
  13. 13. CONSIDER THIS With changing business models, globalisation, elimination of trade barriers, some of the international tax rules are not working anymore. Some companies are not paying tax anywhere. 13 HARVEERSIRforGSSCORE
  14. 14. ALSO CONSIDER A Purely Domestic company v/s MNCs in terms of tax minimization opportunity. Large multinationals were able to use mismatches in domestic tax laws and gaps in the international tax system to dramatically reduce their corporate taxes 14 HARVEERSIRforGSSCORE
  15. 15. BEPS is an effort by OECD-G20 to modernise international taxation policies amongst developed and developing economies to reflect the changed and ever changing reality. 15 HARVEERSIRforGSSCORE
  16. 16. MAGNITUDE..  Each country has a sovereign right to protect and increase its Tax Base.  Due to the significant evolution of the economy that is Digital economy and so on, the tax policy lags behind and corporates exploits these loopholes. (Double Non Taxation)  corporate income tax has a big role in public finance of many developing countries.  The Loss of revenue is estimated to be around $100-240 Bn. 16 HARVEERSIRforGSSCORE
  17. 17. IT CONTAINS..  BEPS project aims to fulfil G20-OECD's 15 points action plan on multifarious aspects of international tax policy.  It includes 13 reports mostly related to double taxation , double non-taxation, Transfer Pricing, Interest Deductions, information sharing, storage based digital taxes etc.  It also looks at the nexus approach that is linking tax benefits directly to R&D expenditure. 17 HARVEERSIRforGSSCORE
  18. 18. BEPS aims to complete (in 2016) the work on a multilateral tax treaty instrument . countries signing on the multilateral instrument may not need to renegotiate their respective bilateral treaties. 18 HARVEERSIRforGSSCORE
  19. 19. THE FOCUS Companies with global turnover in excess of ^750 million (approximately Rs 6,000 crore) have to report details of revenues, profits and taxes paid on a country-by-country basis to their respective tax administrators. Around 900 companies across the globe would be impacted. 19 HARVEERSIRforGSSCORE
  20. 20. FOR INDIA BEPS recommendations pave the way for a contemporary cross-border taxation policy It ensures stricter sourced based taxation of profits linked to place where economic activity and value creation substantially occurs. Rather than looking it as anti- business, it should be seen as upgradation of taxation system. 20 HARVEERSIRforGSSCORE
  21. 21. DTAA AMENDMENT WITH MAURITIUS Harveer Singh
  22. 22. 22 HARVEERSIRforGSSCORE
  23. 23. 36-year-old convention for avoidance of double taxation to curb revenue losses and money laundering. more than half the foreign investments coming into this country had been routed through Singapore or Mauritius. 23 HARVEERSIRforGSSCORE
  24. 24. RULES  India the right to tax capital gains arising from sale or transfer of shares of an Indian company acquired by a Mauritian tax resident,  It proposes to exempt investments made until March 31, 2017, from such taxation.  The government also said that shares acquired between April 1, 2017 and March 31, 2019 will attract capital gains tax at a 50% discount on the domestic tax rate — i.e., at 7.5% for listed equities and 20% for unlisted ones. 24 HARVEERSIRforGSSCORE
  25. 25. The full tax impact of the protocol will fall on investments beginning April 1, 2019, when capital gains will attract tax at the full domestic rates of 15% and 40%. Applicable only to those entities who invest a minimum of `27 lakh (or 1.5 million Mauritian rupees) in a year 25 HARVEERSIRforGSSCORE
  26. 26. IMPACT  Between April 2000 and December 2015, Mauritius accounted for $ 93.66 billion — or 33.7% — of the total foreign direct investment of $ 278 billion  Mauritius and Singapore less attractive to route investments to India, some of these transactions could now come through Netherlands which do not levy taxes on gains made through short-term transactions in financial securities. 26 HARVEERSIRforGSSCORE
  27. 27.  Capital gains on shares for Singapore can also now become source based due to direct linkage of Singapore DTAA Clause with Mauritius DTAA.  There are more than 90 Tax Havens across the Globe.  We, continue to allow P-Notes. (Total $30 Bn P-Notes investment in Indian Exchanges) 27 HARVEERSIRforGSSCORE
  28. 28. WHY AMENDMENT The Domestic Politics Pressure BEPS ICIJ: Mossack Fonseka GAAR 28 HARVEERSIRforGSSCORE
  29. 29. BANKRUPTCY CODE
  30. 30. BACKGROUND Doing Business Report,2016, India is at 136 out of 189 countries. Secured Creditor in India recovers 25.7 % against 72.3 % of OECD Average. Whole process takes 4.7 years in India (OECD 1.7 Years ) ** compared to 0.8 years in Singapore and 1 year in London. 30 HARVEERSIRforGSSCORE
  31. 31. 31 HARVEERSIRforGSSCORE
  32. 32. BACKGROUND  Kingfisher, once India's second-biggest airline, was grounded in 2012 with debts of over $1.5 billion.  But it was not until February 2015that its long-suffering creditor banks got their hands on its former headquarters in Mumbai.  Nearly 60,000 bankruptcy cases languish in India's overburdened courts. 32 HARVEERSIRforGSSCORE
  33. 33. ISSUES  some laws forbid creditors from taking any legal action against the defaulter until a restructuring plan is in place; that can take several years.  In the meantime, owners of sick companies retain day- to-day management control and often prolong court proceedings as nervy creditors watch the value of their assets dwindle  defaulters to start another business under their relative’s name by siphoning off business from the old one. Insolvency protection for debtors, too, is similarly flawed. Ailing companies have to wait until their net worth is reduced by half before they qualify as “sick”  Other Labor and Land laws conflict with the selling of Land or laying off workers. 33 HARVEERSIRforGSSCORE
  34. 34. ISSUES  To be declared sick, and qualify for court protection, firms have to apply to the Board for Industrial and Financial Reconstruction, a government agency, which will not act until the firm has frittered away half of its net worth in losses. 34 HARVEERSIRforGSSCORE
  35. 35. PROVISIONS OF THE ACT  time-bound processes for insolvency resolution of companies and individuals. (within 180 days).  The assets of the borrowers may be sold to repay creditors, if insolvency not resolved.  Would be conducted by licensed insolvency professionals (IPs). These IPs will be members of insolvency professional agencies (IPAs). IPAs will also furnish performance bonds equal to the assets of a company under insolvency resolution.  Information utilities (IUs) will be established to collect, collate and disseminate financial information to facilitate insolvency resolution. 35 HARVEERSIRforGSSCORE
  36. 36.  The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies.  The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individuals.  The Insolvency and Bankruptcy Board of India will be set up to regulate functioning of IPs, IPAs and IUs.  The Board will consist of representatives of Reserve Bank of India, and the Ministries of Finance, Corporate Affairs and Law. 36 HARVEERSIRforGSSCORE
  37. 37. i) insolvency resolution costs, including the remuneration to the insolvency professional, ii) secured creditors, whose loans are backed by collateral, dues to workers, other employees, iii) unsecured creditors, iv) dues to government, v) priority shareholders and vi) equity shareholders. 37 HARVEERSIRforGSSCORE
  38. 38. POSSIBLE IMPACTS Banks NPAs would be reduced. Specially PSBs. Ease of Doing Business => Investment Improve investor confidence and can deepen the corporate bond market. New Start Ups => If Succeed- Party, If Fail => Bankruptcy 38 HARVEERSIRforGSSCORE
  39. 39.  One, when a loan default occurs, and either the borrower or the lender approaches the NCLT or DRT for initiating the resolution process.  Two, the creditors appoint an interim Insolvency Professional (IP) to take control of the debtor’s assets and company’s operations, collect financial information of the debtor from information utilities, and constitute the creditors’ committee.  Three, the committee has to then take decisions regarding insolvency resolution by a 75% majority. 39 HARVEERSIRforGSSCORE
  40. 40.  Four, once a resolution is passed, the committee has to decide on the restructuring process that could either be a revised repayment plan for the company, or liquidation of the assets of the company. If no decision is made during the resolution process, the debtor’s assets will be liquidated to repay the debt.  Five, the resolution plan will be sent to the tribunal for final approval, and implemented once approved 40 HARVEERSIRforGSSCORE
  41. 41. THANK YOU  41 HARVEERSIRforGSSCORE
  • chandnilall

    Apr. 21, 2019

Black Money related

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