In a significant move that will eventually help the government seek information from tax havens, the revenue department in the finance ministry has started the process of defining non-cooperative jurisdictions — countries that do not share any information about companies evading tax in India. Government sources told The Indian Express that the finance ministry has formed a five-member committee for defining the characteristics of such a jurisdiction and then prepare a list of countries that would qualify as a non-cooperative jurisdiction. The committee would have to do a delicate balancing act as the issue is not only financial but also political, the sources said. According to the sources, the committee will delve into the mechanism used by such jurisdictions for acting as tax havens and the reasons for non-existence of information exchange processes for tax purposes. “After collecting inputs, the department will develop a tool box to counter such activities,” a source said. It will also work on measures to be adopted by India in combating such jurisdictions, the sources said, adding that these would form a part of the proposed Direct Tax Code (DTC). The DTC proposes provisions like General Anti-Avoidance Rules (GAAR) and treaty override to deter tax havens. The new definition being formed will be a step in the same direction, the sources said. Last year, following the G-20 summit, the Organisation for Economic Cooperation and Development (OECD) had agreed to exchange information on tax upon request and had provided a detailed report on progress by countries across the world towards implementation of an internationally agreed standard on exchange of information for tax purposes. It consists of four parts — jurisdictions that have substantially implemented the internationally-agreed standard like Argentina, Isle of Man, Lienchtenstein, Switzerland; tax havens that have committed to the such standard but have not yet substantially implemented it like Cook Islands and Panama; other financial centres that have committed to the standard but have not yet substantially implemented it like Costa Rica and Guatemala; and, jurisdictions that have not committed to implement the standard (all jurisdictions have now committed). Recently, India also took its first step towards bringing back unaccounted money by entering into accords with nine jurisdictions to share information on such transactions.
