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# BLACK MONEY
1980 and 2007 ranges from 45% to 70% of
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
Rs.28 lakh crore (around $466 billion) was
stashed away illegally in bank accounts
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
India’s Fight against Black Money
All major databases on which action have
been initiated have all come from foreign
sources. Be it HSBC Geneva or
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
Strict implementation of the Black Money
(Undisclosed Foreign Income and Assets) and
Imposition of Tax Act 2015.
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
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
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
IDS: EFFECTIVE 1ST JUNE TO SEPTEMBER 30TH
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
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?
BASE EROSION AND PROFIT
By: Harveer Singh
With changing business
elimination of trade barriers,
some of the international tax
rules are not working anymore.
Some companies are not
paying tax anywhere.
A Purely Domestic company
v/s MNCs in terms of tax
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
BEPS is an effort by
OECD-G20 to modernise
policies amongst developed
and developing economies
to reflect the changed and
ever changing reality. 15
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
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
It also looks at the nexus approach that is
linking tax benefits directly to R&D expenditure.
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.
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
Around 900 companies across
the globe would be impacted. 19
BEPS recommendations pave the
way for a contemporary cross-border
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
36-year-old convention for
avoidance of double taxation to
curb revenue losses and money
more than half the foreign
investments coming into this
country had been routed through
Singapore or Mauritius. 23
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.
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%
Applicable only to those entities who
invest a minimum of `27 lakh (or 1.5
million Mauritian rupees) in a year
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
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
We, continue to allow P-Notes. (Total $30
Bn P-Notes investment in Indian
Doing Business Report,2016, India is
at 136 out of 189 countries.
Secured Creditor in India recovers
25.7 % against 72.3 % of OECD
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
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.
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
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
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.
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.
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
The Board will consist of representatives of
Reserve Bank of India, and the Ministries of
Finance, Corporate Affairs and Law.
i) insolvency resolution costs,
including the remuneration to the
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
Banks NPAs would be reduced.
Ease of Doing Business => Investment
Improve investor confidence and can
deepen the corporate bond market.
New Start Ups => If Succeed- Party, If
Fail => Bankruptcy
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.
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