India's non-signing of Automatic Info Exchange agreement - ‘Confidentiality’ vs 'disclosure' crossfire

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India's backing out at the last minute as 51 countries signed the historic multilateral convention on global automatic exchange of information has stunned many in the tax world.  Finance Minister Arun Jaitley, in his blog, has sought to pin India's non-participation on the issues regarding constitutionality of 'confidentiality' clauses in India's DTAAs, and has called for a re-consideration of this strict view (taken by the Court). The Finance Minister has further opined that in a choice between unauthorized disclosure and disclosure as per treaties, the latter is both a fair and beneficial proposition.

 

With the Government seemingly caught in a crossfire between 'confidentiality' clause in DTAAs and insistence on name disclosures by Indian Courts, is there a way out of this impasse? Is disclosure of names, but by honouring tax treaties, the more beneficial option, as suggested by the Finance Minister? Will India staying out of the multilateral convention, stem the information flow and put a big question mark in its its fight against tax evasion & black money?

B M Singh
Former Chairman, CBDT

I am inclined to agree with the views of the Finance Minister. To facilitate the flow of information India should adhere to the confidentiality clause in the Treaties as this would definitely be in the interest of the Revenue and, consequently, the Nation. Mere publicising of the names before prosecutions are launched would not serve any purpose except get publicity for the drive against black money. The courts have to respect that and understand the sovereign power to enter treaties by the executive as was ruled by the Supreme Court in the land mark decision of ' Azadi Bachao---'

 

A compromise could also be reached if the courts respect the confidentiality of the information received and this process is validated in our treaties as an internal process.

Mukesh Butani
Partner, BMR Legal

The debate on black money in India has Political and economic overtures. If you look at the history of the debate, it dates back to 2011 when renowned lawyer Ram Jethmalani filed a petition in the supreme court seeking courts direction to initiate proceedings for bringing back funds stashed in offshore bank accounts. It's not just about monies escaping taxes, but, other forms of violations including exchange controls, corruption law etc.

 

The ongoing investigations and SIT mandate is not restricted solely to tax evasion. The composition of the SIT besides 2 retired judges of the SC are members from various investigative arms of the Government such as directorate of revenue intelligence, Financial Intelligence Unit, RAW, IB, enforcement directorate etc. These are over and above department of revenue administratively responsible for tax matters.

 

Given the global debate since 2009 on tax havens, disclosures and cracking offshore accounts, INDIA de horse of politics is not distanced from the world insofar as it's commitment to deal with the challenges is concerned. India has played an instrumental role as part of Global forum on exchange of information and transparency for tax purposes since it's formation in 2009 and championed signing of several tax information exchange agreements...

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T P Ostwal
International Tax Expert and Chartered Accountant

If govt thinks that there is problem then Govt can take approval of the Govt of Germany to make disclosure .if that is done then what is the problem . The info relates to Liechtenstein which is not our treaty partner in any case and hence how does it matter? Not singing of Automatic Exchange Agreement by India does not prevent the exchange of information which they have purchased from person who has stolen the data. The information does not belong to their country. Exchange of information needs to be carefully used and with the consent of the other country exchanging the information, it can be used for any purpose. The Govt of India ought to have taken the information which was readily available from other country. But, instead of taking the information in the ordinary course, if we choose to take such information under confidentiality article, then we are tightening our own hands. In other words, preventing sharing such information with the Courts. The exchange of information article of the treaty can be easily circumvented by requesting the countries sharing the information to allow it to be given to the Courts in public interest. And why...

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Mohan Parasaran
Sr. Advocate (Former Solicitor General of India)

India's decision not to sign the Automatic Information Exchange agreement was obviously due to the apprehension of the Government in its ability to protect confidentiality in disclosure of the names, in light of the orders passed by the Hon'ble Supreme Court in the PILs spearheaded by Mr. Ram Jethmalani.

 

The non-signing of the agreement has already sent appropriate signals to the concerned quarters. India should go ahead and join the bandwagon, instead of taking a backfoot on the ground of developments on the domestic front, particularly, orders passed by the Hon'ble Supreme Court of India.

 

The Indian Government has repeatedly been highlighting its predicament to the Hon'ble Supreme Court in disclosure of names and has repeatedly sought modifications of the order dated July 4, 2011 pronounced by a bench comprising Justices B. Sudershan Reddy and S. S. Nijjar. A review petition was also filed against this order. Strangely, at that time, the parties in opposition doubted the bonafides of the then Government in seeking such modification / review, without fully realizing the predicament of India in its commitment to various countries in obtaining information and parting with information by way of a mutual cooperation process, while maintaining confidentiality at the same time.

 

The...

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Philip Baker
Queen's Counsel

I wonder if the Indian Government has, with respect, approached this matter from the wrong direction.  They are, quite properly, concerned about signing up to clauses guaranteeing confidentiality while it may be the case that they will be ordered by the Courts to disclose information that has been received under an exchange.  However, it is not the signing of an exchange of information clause in a treaty or other agreement that is the issue, but rather the actual supply of information by the other government.  That other government has to be reassured that information it supplies will be kept confidential.  If it does not have that assurance, then it should not supply the information, and is entitled to refuse to do so.  In 99% of cases, India must surely be able to give that assurance to the other country – the information will be kept confidential, and the other country can supply it.  The disclosure of information is only likely to be ordered by the Courts in India in a tiny number of cases.  Meanwhile, India can still supply information to the other government (always providing that government guarantees to keep it confidential, which should surely be no problem), so...

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