The Government’s efforts to curb black money menace will get a big push at the G-20 leaders’ summit next week in Brisbane where Prime Minister Narendra Modi and his team will pursue establishment of a new regime for Automatic Exchange of Information (AEOI) on transnational transactions of funds. The new regime will pressurise those offshore financial institutions that facilitate tax evasion to give details of big transactions to various Governments in order to prevent money laundering.
Officials said these far-reaching initiatives will help identify and catch tax cheats through the AEOI using a Common Reporting Standard (CRS). While this will help curb money laundering activities in future, officials said it may not impact the existing account holders in foreign banks. “A framework will be put up for systematic information collection to prevent future transactions in trans-national financial institutions,” said Suresh Prabhu, who has been appointed as PM’s Sherpa (chief negotiator) for the G-20 summit.
India is among the countries that are keen for an international framework for systematic sharing of financial information on cross-border tax evasion and has been making consistent efforts at international forums. At the G-20 Finance Ministers and Central Bank Governors meeting held in September, countries had broadly agreed for a global initiative against tax evasion through AEOI by 2017-18. While at the September meeting some of the countries sought time to have consultations, most of the G-20 countries agreed to coordinate to protect the tax base through cross-border arrangements.
For effective implementation of CRS each country has to also have a domestic legislation which will be done after finalised standards and modalities are worked out. The implementation of the CRS will require both financial institutions and tax administrations to undertake IT and broader system changes.
Besides, India is pushing for a Base Erosion and Profit Shifting (BEPS) action plan by 2015, a move that will make it difficult for multinationals to shift profits from one jurisdiction to another to save taxes. India is also for reforms in the International Monetary Fund.
At the G-20 forum India will also seek reduction of remittances charges so that Indian workers can send more money back home. The remittance charges in some countries are as high at 10 per cent while India says it should not be more than 5 per cent. In fact, Saudi Arabia has reduced it to 3.5 per cent. India is world’s largest recipient of remittances with $71 billion sent in 2013-14.
At international level India wants dialogue on improving transparency in energy markets, particularly gas markets and promoting energy efficiency. Seeking strong action on climate change, India wants all future negotiations to be concluded at the earliest. “The G-20 countries are the largest guzzlers of energy and we are demanding global change in energy use. This includes having more transparency in energy use, opting for cleaner and renewable energy,” Prabhu said. The next round of climate change negotiations will place in Peru in December.
“We want changes in global energy mix. There should be more transparent changes in moving towards renewable and clear energy,” he added. Prabhu said the G-20 will also have deliberations on issues relating to gas market. “India has stake on this issue since it does not produce enough (gas) to meet its demand,” he added.