Indian Prime Minister Narendra Modi on Sunday managed to get the Group of 20 include a certain clause in the final Leaders’ Communiqué that will make it difficult for tax havens to give complete tax exemption to companies.
This, along with the G20’s endorsement of a global Common Reporting Standard for automatic exchange of tax information on a reciprocal basis, are the twin pillars in India’s fight against tax evasion and repatriating unaccounted money, said Suresh Prabhu, sherpa to Prime Minister Modi for the G20 Summit.
Prabhu said that the Prime Minister made a strong pitch against black money. “At present, there are many rigidities in international tax laws, and past tax treaties also do not facilitate easy exchange of information,” he said. India has to make specific requests with tax jurisdictions for information, and more often such information is shared with caveats.
The Prime Minister’s Office said that India’s concerns on black money and tax avoidance have been taken on board in G20. This, government officials said, would give an impetus to India’s move to renegotiate treaties with some countries.
On the implication of the clause that now commits the G20 to ensure ‘transparency of taxpayer-specific rulings found to construe harmful tax practices’, Usha Titus, Joint Secretary, Ministry of Finance, pointed out that Luxembourg, for instance, had given a series of rulings which effectively did not require certain corporates to pay any tax. “The inclusion of this clause will make it difficult for tax havens to do so for specific corporates,” she said.
This is part of the base erosion and profit shifting (BEPS) action plan of the G20/ OECD to modernise international tax rules. The G20 final draft said that this plan has made significant progress. “We are committed to finalising this work in 2015,” it said. The G20 countries are expected to exchange information with each other and other countries by 2017 or end-2018 after completing legislative procedures.
Modi has been pushing the issue of black money in his meetings with global leaders including Japanese Prime Minister Shinzo Abe and the BRICS leaders. At an informal meeting with BRICS leaders Dilma Rousseff of Brazil, Xi Jinping of China, Vladimir Putin of Russia and Jacob Zuma of South Africa, Modi called for close coordination on unaccounted money stashed abroad. He said unaccounted money was also linked to security challenges.
Reform should be people-driven, simplify processes
Modi in his address to the G20 nations on Saturday spoke of the need for reform - to make it people-driven and that it should lead to simplification of processes. Speaking at a retreat and lunch before the G20 summit, Modi said reform should be technology driven and should have scale and address the root causes, according to tweets posted by ministry of external affairs spokesperson Syed Akbaruddin.
"Reforms should lead to simplification of processes...& processes of governance must be reformed - PM @narendramodi to G-20," said a tweet.
He said: "Reform is a continuous multi-stage process... must be institutionalized - Globally, reforms are handicapped with perception of being government programs, a burden on the people, this needs to change."
"Reforms should lead to simplification of processes... and processes of governance must be reformed," he said. "Reform is bound to face resistance... must be insulated from political pressures. Reform has to be driven by the people....cannot be by stealth," he added. Earlier, in his first engagement of the day, Modi said repatriation of black money kept abroad was a key priority and called for "close coordination" on the issue during a meeting of BRICS leaders here.
The G20 membership comprises a mix of the world's largest advanced and emerging economies, representing about two-thirds of the world's population, 85 per cent of global gross domestic product and over 75 per cent of global trade.
The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, Britain, the US and the European Union.