Finance Minister Pranab Mukherjee said on Tuesday that India would start fresh talks with all the 77 countries with which it has double-tax-avoidance treaties, in order to check tax evasion. "I have asked the revenue department to reopen negotiations for all 77 double-tax-avoidance agreements which we have entered so far with all countries so that we can have real-time exchange of information on tax evasion and tax avoidance,'' the finance minister said at the India Economic Summit on Tuesday.
Revenue secretary P.V. Bhide disclosed that a team led by a joint secretary in the ministry of finance had already left for Switzerland for talks on amending the double-taxation-avoidance agreement with the country. The BJP and the Left parties had raised the issue of black money being stashed by Indians in Swiss banks during the Lok Sabha election campaign. A petition has also been filed on the issue in the Supreme Court.
Mukherjee said that the country had agreed to accept the guidelines prescribed by the Organisation of Economic Cooperation and Development (OECD) model tax convention code, which talks about exchange of information.
The government is keen to rot out treaty-shopping which refers to taking advantage of double-tax-avoidance agreements by routing investments through tax havens. He said the issue had been discussed at the G20 finance ministers meeting in Scotland. "Several countries have already started falling in line while others will follow,'' he added.
"Umpteen times, I have stated that in due course we shall have to take corrective measures to bring down the fiscal deficit. But I still do feel that strong domestic demand is necessary and so the stimulus will continue for some more time," Mukherjee said.
Mukherjee said increasing protectionism among countries was an area of concern and he had highlighted this at the G20 finance minister's meeting earlier this week.
He said the finance ministers had discussed a strategy to exit the global stimulus running into trillions of dollars but each country would have to follow its own approach.
He explained that the G20 was a forum where a coordinated approach could be discussed and there was much to learn from the experience of other countries.
However, the G20 is not a forum like the International Monetary Fund (IMF), World Bank, World Trade Organisation (WTO) or United Nations (UN), where specific decisions could be taken, he added.
He said after the global financial crisis hit the Indian economy, the government and the Reserve Bank of India ( RBI) took collective steps to boost demand by cutting taxes and interest rates.
The initiatives, however, pushed up fiscal deficit to 6.8 per cent of the gross domestic product ( GDP) and this has to be brought down in future as it cannot be sustained indefinitely.
Mukherjee said a return to fiscal consolidation is on the government's agenda as indicated by the Prime Minister Manmohan Singh but till the robust recovery takes place in developed countries.
"We have to, therefore, ensure a high level of domestic demand by keeping up the investment in infrastructure," he added. The finance minister said he expected the economy to grow at over seven per cent in 2010- 11 as the monsoon was expected to be normal and the economies of the advanced countries will have recovered.
Two years after that it would be possible for the Indian economy to achieve the magical figure of nine to 10 per cent growth, he added.