Confronting tax evasion in India

OECD report on tax transparency

Business & Politics

News - Biz@India

November 20, 2017

/ By / Kolkata

India ranks 19 out of 180 countries in terms of the most number of names in the 'Paradise Papers'

India ranks 19 out of 180 countries in terms of the most number of names in the ‘Paradise Papers’

Despite a ‘largely compliant’ status in the recently released OECD tax transparency report, India’s plans to support sustainable development through investments in infrastructure, health and other major issues face challenges due to an unremitting tax skirting rampant among overseas enterprises.

Combating offshore tax evasion and enhancing a worldwide cooperation for exchange of information was one of the key objectives of India when the country signed the multilateral pact with the Organisation of Economic Cooperation and Development (OECD) in June 2017. Arun Jaitley, the Finance Minister of India inked the agreement in Paris that promised to modify India’s global treaties and curb revenue loss, especially in the Base Erosion and Profit Sharing (BEPS) strategies. On Friday, last week, the first report after the formal agreement came as a peer review that carefully took tax transparency of individuals, companies and investors in India as well as those based out of India.

Automatic Exchange of Information (AEOI) Implementation Report 2017 released a peer report on six countries including India at the 10th meeting of the Global Forum on Transparency and Exchange of Information of Tax Purposes held in Yaounde, Cameroon. The meeting was graced by 200 delegates from 90 delegations and witnessed the adoption of the first report on the status of implementation of the AEOI Standard and also released the Paradise Papers. The other five countries that featured in the report were Curacao, Denmark, Isle of Man, Italy and Jersey.

India received an overall rating of largely compliant with the international standard of exchange of information on request (EOIR) for the transparency of its entities and its EOI practice over the period July 1, 2013 to June 30, 2016. Its legal framework is generally in line with the international standard, but some improvements are required to ensure that the new obligations to maintain beneficial ownership information on all the entities and legal arrangements are well monitored in practice.

The peer review was conducted by the member countries to investigate the implementation of the OECD standards of transparency and information exchange for tax-related issues and combat offshore tax evasion. OECD in an earlier statement revealed, “Tax transparency and exchange of information between tax authorities on financial assets and activities of their taxpayers abroad has proved to be a valuable tool in this fight.”

According to the report that has otherwise given updated the status of the other countries such as Denmark (from compliant to largely compliant) noted the room for improvement in case of India. The report stating India is largely compliant describes, “India sends large volume of EOI requests in its policy to crackdown on tax evasion by Indian residents. India must continue its work on improving the quality of the EOI requests that it sends to its partners; notably by continuing to implement its action plan on the matter and good communication with its EOI partners. Its rating was Compliant in the first round of reviews when these two aspects were not reviewed.”

Whether there is a high rate of taxation in India or the country is yet to figure out the means to curb corruption, has been a perennial problem over the last four decades. Misrepresentation before tax authorities, getting refunds on false investments, evasion of tax through smuggling or not paying sales tax, VAT, Income tax, Customs Duty, Excise duty is still prevalent in India. However, the simplification of too many taxes into one Goods and Services Tax (GST) in India was hailed as a positive move by the OECD.

The OECD’s AEOI aims to identify the formerly undetected tax evasion.  It will enable governments to recover tax revenue lost to non-compliant taxpayers, and will further strengthen international efforts to increase transparency, cooperation, and accountability among financial institutions and tax administrations. Additionally, AEOI will generate secondary benefits by increasing voluntary disclosures of concealed assets and by encouraging taxpayers to report all relevant information.

Paradise Papers – the biggest data leak

The ‘Paradise Papers’ released in the report allegedly enlists a huge data of individuals and businesses that invested in offshore properties to evade tax in their countries. India is also looking forward to implementing the tax practices detailed in the ‘Paradise Papers’. Out of the 180 countries in the Paradise Papers, India ranks 19 with 714 Indians including a host of political figures.

It will be interesting to find out how India deploys a multi-agency group to investigate if the over 700 entities named in the leaks mentioned in the ‘Paradise Papers’ paid due taxes. The country plans to follow up the investigation with strict regulatory regimes for individuals and enterprises before setting up offshore businesses.



  1. India’s main tax evasion problem is certainly not coming from overseas/foreign companies: it is overwhelmingly a domestic one. Local companies and individuals hardly ever pay any income tax, whereas most foreign companies tend to aim for the highest possible levels of compliance.

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