MUMBAI: A fortnight ago, three businessmen from the same family were summoned by tax officials in Mumbai and Kolkata to appear with their tax returns and passports. In a world where tax sleuths carry out fishing enquiries to trace undisclosed income of wealthy individuals, jewellers and builders, the summons may have looked innocuous. But they weren't. For book keepers, tax practitioners and the well-heeled with offshore, secret bank accounts, it surfaced a lurking fear: some tax havens are slowly, but surely, beginning to share specific information with Indian authorities.
Around March-April, the three businessmen had moved money from their bank accounts in Isle of Man , Cayman Islands and Guernsey. In one case, money was wire transferred from Guernsey to Switzerland while in two other cases, funds were moved from personal accounts to accounts of trusts where the individuals concerned were beneficiaries. "We understand tax authorities have come to know of these transactions. This is possible only if these jurisdictions have shared information," said a person aware of the transactions. "This was unthinkable in the past when money changed hands and moved from one account to another without anyone getting a whiff of it," he said. Perhaps, not anymore.
Shefali Goradia, partner at tax consultant firm BMR Advisors , said, "But, under the exchange of information treaties, the countries are required to share information only if the other country has reasonable ground to believe there has been a tax offence. They are not required to respond to general inquiries."
In this case, the tax department indeed had something definite to back the summons. The three businessmen also figure in the list of Indians (some of whom are NRIs) holding accounts in a Liechestien bank. Two years ago, Germany had shared the list with the Indian government. "The I-T Department has long completed the assessment and raised demand from most in the Liechestien list, and some cases have reached the appellate stage. So, it cannot be in connection with the Liechestien probe. We strongly feel that the department sought information from some of the other tax havens that are co-operating," said a senior Mumbai-based chartered accountant. When contacted, officials in the Income-Tax Department declined to comment as the matter was under investigation.
Passport numbers, which banks worldwide use for the 'know your customer' procedures, can be useful in snooping around for bank account or transaction details of residents, said the city-based accountant. "We have this perception that tax havens may try to stonewall information. But this may not be true in all cases," he said. In fact, Indian tax officials can approach tax havens with basic details like name, address, passport number and some evidence of tax violation (even a trivial one) to obtain information.
According to Anup Shah, partner at Pravin Shah & Associates, tax officials may go through passports to verify whether the person concerned, who may have claimed NRI status and obtained tax benefit, has spent the stipulated time abroad. "Information is bound to flow once tax treaties are in place," said Sudhir Kapadia, tax market leader, Ernst & Young. "But what many aren't aware of is that we have already signed a treaty with Singapore, in line with the modified treaty with Switzerland, following which we can ask Singapore for specific bank account details which was not possible before," he said.
Source: The Economic Times
Around March-April, the three businessmen had moved money from their bank accounts in Isle of Man , Cayman Islands and Guernsey. In one case, money was wire transferred from Guernsey to Switzerland while in two other cases, funds were moved from personal accounts to accounts of trusts where the individuals concerned were beneficiaries. "We understand tax authorities have come to know of these transactions. This is possible only if these jurisdictions have shared information," said a person aware of the transactions. "This was unthinkable in the past when money changed hands and moved from one account to another without anyone getting a whiff of it," he said. Perhaps, not anymore.
Shefali Goradia, partner at tax consultant firm BMR Advisors , said, "But, under the exchange of information treaties, the countries are required to share information only if the other country has reasonable ground to believe there has been a tax offence. They are not required to respond to general inquiries."
In this case, the tax department indeed had something definite to back the summons. The three businessmen also figure in the list of Indians (some of whom are NRIs) holding accounts in a Liechestien bank. Two years ago, Germany had shared the list with the Indian government. "The I-T Department has long completed the assessment and raised demand from most in the Liechestien list, and some cases have reached the appellate stage. So, it cannot be in connection with the Liechestien probe. We strongly feel that the department sought information from some of the other tax havens that are co-operating," said a senior Mumbai-based chartered accountant. When contacted, officials in the Income-Tax Department declined to comment as the matter was under investigation.
Passport numbers, which banks worldwide use for the 'know your customer' procedures, can be useful in snooping around for bank account or transaction details of residents, said the city-based accountant. "We have this perception that tax havens may try to stonewall information. But this may not be true in all cases," he said. In fact, Indian tax officials can approach tax havens with basic details like name, address, passport number and some evidence of tax violation (even a trivial one) to obtain information.
According to Anup Shah, partner at Pravin Shah & Associates, tax officials may go through passports to verify whether the person concerned, who may have claimed NRI status and obtained tax benefit, has spent the stipulated time abroad. "Information is bound to flow once tax treaties are in place," said Sudhir Kapadia, tax market leader, Ernst & Young. "But what many aren't aware of is that we have already signed a treaty with Singapore, in line with the modified treaty with Switzerland, following which we can ask Singapore for specific bank account details which was not possible before," he said.
Source: The Economic Times
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