India, US to jointly check offshore tax evasion
What's the story
India and the US will collaborate to increase sharing of cross-border tax information through joint audits and tax examinations in order to reduce tax evasion and avoidance. This was highlighted during the 6th US-India Economic and Financial Partnership (EFP) held in Washington. The EEP was co-chaired by Indian finance minister, Arun Jaitley and US treasury secretary, Jacob Lew.
About
Tax evasion vs tax avoidance
Tax evasion is an illegal practice whereby a person or an organisation intentionally avoids paying their legitimate tax dues. Tax avoidance is a legal practice used by tax experts and professionals to reduce the tax liabilities by employing various strategies. However, both the tax avoidance and evasion are viewed as a form of tax non-compliance as they subvert a states's tax system.
Introduction
Indo-US tax cooperation
India and the US have a healthy record of cooperation on taxation related matters. India already has a Double Taxation Avoidance Agreement (DTAA) with the US since 2009. The 2 nations have been cooperating on MAP (Mutual Agreement Procedure) which offers an alternate to taxpayers to resolve disputes of double taxation. The MAP procedures had also been listed in the DTAA.
20 Jul 2015
India US sign FATCA
India and the US had signed the Foreign Account Tax Compliance Act (FATCA), an agreement that allows for the automatic exchange of tax information between the 2 countries. It is an effort by both the nations to curb tax evasion and increase transparency. Under FATCA, country's financial institutions would report tax information of foreign account holders which will then be exchanged at governmental levels.
Personal
Tax information exchange starts under FATCA
The sharing of tax information between the 2 nations on a reciprocal arrangement under FATCA had already commenced from September 2015.
15 Apr 2016
The minutes of the joint statement
During the 6th Indo-US EEP, both the nations also agreed on checking illicit finance as a means to curb global terrorism. As a display of greater cooperation, the joint statement after the meeting said that both nations have started accepting "bilateral Advanced Pricing Agreement applications by companies in both jurisdictions". This will strengthen cross-border business and enhance commercial ties between the 2 nations.