India identifies 9 special tax havens


fe Bureaus Posted online: Wednesday, Apr 14, 2010 at 0832 hrs

New Delhi : India will now be able to officially initiate information exchange with at least nine tax havens and modify regulations to combat tax evasion. This will be possible because the government has approved the notification of these areas as 'specified territory'.

Cayman Islands, Bermuda, British Virgin Islands that are often called tax havens would now be classified as special territory by the Indian government in the tax laws helping it to officially initiate talks with these jurisdictions with regard to tax avoidance and exchange of information.

Till now the country could not officially initiate talks on the issue as agreements were signed between the two countries, India and the other country and there was no way how these specific areas could be dealt with.

However, Section 90 of the Income Tax Act was amended by the Finance Act 2009 to enable the government to enter into an agreement with any specified territory outside India, in addition to the already existing provision of agreement with the government of any country.

The nine countries which have now been identified as specified territory are Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, (all British Overseas Territories); Guernsey, Isle of Man, Jersey, (all British Crown Dependencies); Netherlands Antilles (an Autonomous Part of the Kingdom of Netherlands) and Macau (a Special Administrative Region of the People's Republic of China), the government said in a statement on Tuesday.

The notification of Hong Kong, a special administrative region of the People's Republic of China, as a specified territory for the purpose is also under process.

"The Centre can now initiate and negotiate agreements for exchange of information for the prevention of evasion or avoidance of income tax and assistance in collection of income tax with these nine specified territories," the statement has said.

India has been facing tax evasion and avoidance through the tax havens where Indians as well as overseas firms use these areas to route investments in India and taking benefit of liberal tax laws in haven nations.

To take action on the tax evaders it is required the two countries exchange information on the matter. Also, money launderers engaged in illegal activities such as terrorism funding can be dealt with if the information is exchanged.

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