Many steps have been taken by the
Government from time to time to check the taxevasion.
Following Wanchoo Committee's recommendations
the Government enacted the Taxation Laws
(Amendment) Act, 1975. This act has brought on the
statute vari-ous provisions for preventing tax-evasion
and proliferation of black-money Deterrent punishments
have been, provided for tax-evasion. The other
committees were—the Dangli Committee on Controls
and Subsidies (1980), The Rajah Chelliah Committee,
and the National Institute of Public Finance and Policy
(1985).
With a view of bringing about simplification
and rationalization of the direct tax laws, the
Government appointed a committee of experts
known as the "Direct Tax Laws Committee' in
June 1977. The recommendations of the Committee
are being processed for implementation.
In 1976 the Government imposed a
statutory obligation on the management to
carryout physical verification of its assets for
the satisfaction of the auditors to ensure that
no money is created through the sale of fixed
assets. Management is also obliged to maintain
a proper record of the sale of scrap.
Another step taken by the Government to
unearth black-money was the launching of the
voluntary disclosure scheme in 1975, No
penalties were impo-sed on the persons
disclosing black-money voluntarily.
Demonetization of the notes of higher
denomination has also been one of the recent
steps of the Government to unearth blackmoney.
Curbing of the smuggling activities in
the country has been the main concern of the
Government, The conservation of Foreign
Exchange and Prevention of Smuggling
Activities Act was passed for this matter on
19th December, 1974.
In a bid to mop up black-money, the
Government announced on 12th January, 1981
a new scheme of issuing a ten-year bond of the
face value of Rs. 10,000 each. An ordinance for
this purpose was issued by the President. The
bonds were known as 'Special Bearer Bonds.'
The scheme gives immunity to the investor from
prosecution as well as disclosure of the source
of the money in-vested. Several other series of
such bonds have been released in recent years.
To tackle the menace of illicit funds, the
government has adopted a five-pronged
strategy. It comprises joining the global crusade
against ‘black money'; creating an appropriate
legislative framework; setting up institutions for
dealing with illicit funds; developing systems
for implementation; and imparting skills to the
manpower for effective action
During the last two years, India has negotiated
19 new Double Taxation Avoidance Agreements
(DTAAs) and 17 new Tax Information Exchange
Agreements (TIEAs). In addition, 22 existing
DTAAs have been re-negotiatedIndia also became a full member of global
economic body the Financial Action Task Force
(FATF) last year in pursuit of its fight against
black money.
The government simultaneously has
strengthened its tax enforcement agencies like
the Income Tax department, allowing them to
create a new Directorate of Criminal
Investigation to probe illicit funds including
those stashed abroad. It has strengthened its
Financial Intelligence Unit (FIU) to detect
suspicious transactions in economic channels.
India has recently signed the Convention
on Mutual Administrative Assistance in Tax
Matters, developed jointly by the Council of
Europe and the Organisation for Economic Cooperation
and Development (OECD).
All members of the G20 have now become
signatories but the Convention will have to be
ratified by the Indian Parliament to become law.
Tax evasion and illicit flows are a serious
problem and over the last two years, in order
to check this trend, India has negotiated 19
new double taxation avoidance agreements and
17 new tax information exchange agreements.
The Convention facilitates international cooperation
for a better operation of national tax
laws, while respecting the fundamental rights
of taxpayers. The Convention provides for all
possible forms of administrative co-operation
between states in the assessment and collection
of taxes, in particular with a view to combating
tax avoidance and evasion. This co-operation
ranges from exchange of information, including
automatic exchanges, to the recovery of foreign
tax claims. However the Convention imposes
safeguards to protect the confidentiality of the
information exchanged.
Further India has signed an Agreement
with the Eurasian Group (EAG) to enhance
cooperation in curbing Money laundering and
Terrorist Financing. The agreement was signed
by Dr. Thomas Mathew, Joint Secretary (Capital
Markets) Division of the Department of
Economic Affairs.
The EAG is a Financial Action Task Force
(FATF) styled regional body with 9 members
including India, Russia and China and 29
observers of which 12 are countries and 17 are
international organisations. India was accorded
membership in the EAG in December 2010.
At the 15th Plenary meeting of the Eurasian
Group on Combating Money laundering and
Financing of Terrorism India has offered help
to member nations in enhancing their technical
skills in establishing better financial systems,
capital market monitoring and surveillance
through sophisticated IT tools. Help was also
offered in drafting legislation, law enforcement
techniques and strengthening of their respective
Financial Intelligence Units.
The EAG is soon emerging as an effective
body engaged in combating money laundering
and financing of terrorism.
