No new amnesty scheme for tax evaders, says Pranab
July, 14th 2009
Government has no plans to bring a new amnesty scheme for tax evaders and wants to amend the Indo-Mauritius tax treaty to curb its abuse by companies, the Rajya Sabha was informed today.
"We are not enamoured by (suggestions for) another voluntary disclosure system (VDS)," Finance Minister Pranab Mukherjee said during Question Hour.
VDS schemes in the past offered amnesty to people declaring black money and paying tax.
But VDS schemes cannot be hugely successful unless the rate of tax under the amnesty is lower than the prevailing income tax rates, he said. This policy has been criticised as it amounted to penalising honest tax payers by asking them to pay tax at higher rates.
Mukherjee said the Government was seeking amendment to the Indo-Mauritius tax treaty of 1980 wherein offshore firms resident in Mauritius are exempt from tax on capital gains.
Mauritius wants to position itself as a financial hub and does not tax companies including Foreign Institutional Investors registering with it for investing in overseas markets such as India. In 2000, OPED termed Mauritius as a nation which offers "unfair tax competition."
"We want to amend the particular agreement with Mauritius," Mukherjee said adding New Delhi has offered to compensate the island nation for any loss in revenues because of such change in the treaty to check companies evading paying taxes both in India and Mauritius.