India does not participate fully in Automatic Information Exchange

India is ranked at 25th position on 

the 2011 Financial Secrecy Index. 

 This ranking is based on a combination of their secrecy score and a scale weighting based on their share of the global market for offshore financial services.

India has been assessed with 53 secrecy points out of a potential 100, which places it in the lower mid range of the secrecy scale . India accounts for slightly over 1 per cent of the global market for offshore financial services, making it a small player compared with other secrecy jurisdictions

The World Bank’s Stolen Asset Recovery (StAR) initiative has endorsed estimates that illicit financial flows across borders add up to $1-1.6 trillion per year, about half from developing and transitional economies. Others estimate that illicit financial flows out of developing countries alone stood at around $800 billion - $1.26 trillion in 2008. Looking at a related issue, the Tax Justice Network has estimated, conservatively, that about $250 billion is lost in taxes each year by governments worldwide, solely as a result of wealthy individuals holding their assets offshore. The revenue losses from corporate tax avoidance are greater. It’s not just developing countries that suffer: European countries like Greece, Italy and Portugal have been brought to their knees by decades of secrecy and tax evasion.

These staggering sums are encouraged and enabled by a common element: secrecy. Secrecy jurisdictions, a term we often prefer instead of the more widely used term tax havens, compete to attract illicit financial flows of all kinds, with secrecy as one of the most important lures. A global industry has developed where banks, law practices and accounting firms provide secretive offshore structures to their tax dodging clients. Secrecy is a central feature of global financial markets - but international financial institutions, economists and many others don’t confront it seriously.

The problems go far beyond tax. Secrecy distorts trade and investment flows, and creates a criminogenic environment for a litany of evils that hurt the citizens of rich and poor countries alike: fraud, evasion and avoidance of financial regulations, insider dealing, embezzlement, wholesale bribery, non-payment of alimony, money laundering, tax evasion and much more besides.

India’s 53 per cent secrecy score shows that it must still make major progress in offering satisfactory financial transparency. If it wishes to play a full part in the modern financial community and to impede and deter illicit financial flows, including flows originating from tax evasion, aggressive tax avoidance practices, corrupt practices and criminal activities, it should take action on the points noted where it falls short of acceptable international standards.

TRANSPARENCY OF BENEFICIAL OWNERSHIP – India

1. Banking secrecy: Does the jurisdiction have banking secrecy?

India does not adequately curtail banking secrecy

2. Trust and Foundations Register: Is there a public register of Trusts and Foundations?

India does not put details of trusts on public record

3. Recorded Company Ownership: Does the relevant authority obtain and keep updated details of the beneficial ownership of companies?

India maintains company ownership details in official records.


KEY ASPECTS OF CORPORATE TRANSPARENCY REGULATION – India

4. Public Company Ownership: Does the relevant authority make details of ownership of companies available on public record online for less than US$10?

India does not require that ownership of companies is put on public record

5. Public Company Accounts: Does the relevant authority require that company accounts are made available for inspection by anyone for a fee of less than US$10?

India does not require that company accounts be available on public record

6. Country-by-Country Reporting: Are companies listed on a national stock exchange required to comply with country-by-country financial reporting?

India does not require country-by-country financial reporting by companies.


EFFICIENCY OF TAX AND FINANCIAL REGULATION – India

7. Fit for Information Exchange: Are resident paying agents required to report to the domestic tax administration information on payments to non-residents?

India does not require resident paying agents to tell the domestic tax authorities about payments to non-residents
8. Efficiency of Tax Administration: Does the tax administration use taxpayer identifiers for analysing information effectively, and is there a large taxpayer unit?

India uses appropriate tools for effectively analysing tax related information

9. Avoids Promoting Tax Evasion: Does the jurisdiction grant unilateral tax credits for foreign tax payments?

India avoids promoting tax evasion via a tax credit system

10. Harmful Legal Vehicles: Does the jurisdiction allow cell companies and trusts with flee clauses?

India partly allows harmful legal vehicles.
INTERNATIONAL STANDARDS AND COOPERATION – India

11. Anti-Money Laundering: Does the jurisdiction comply with the FATF recommendations?

India partly complies with international anti-money laundering standards.

12. Automatic Information Exchange: Does the jurisdiction participate fully in Automatic Information Exchange such as the European Savings Tax Directive?

India does not participate fully in Automatic Information Exchange

13. Bilateral Treaties: Does the jurisdiction have at least 60 bilateral treaties providing for broad information exchange, covering all tax matters, or is it part of the European Council/OECD convention?

As of June 30, 2010, India had at least 60 bilateral tax information sharing agreements complying with basic OECD requirements

14. International Transparency Commitments: Has the jurisdiction ratified the five most relevant international treaties relating to financial transparency?

India has partly ratified relevant international treaties relating to financial transparency

15. International Judicial Cooperation: Does the jurisdiction cooperate with other states on money laundering and other criminal issues?

India partly cooperates with other states on money laundering and other criminal issues.










The main flavour of secrecy relies on jurisdictions, read countries putting up barriers to co-operation and information exchange. This may be achieved through deliberately refusing to pursue and obtain information held locally: even with the most impeccable information-exchange agreements with other jurisdictions (countries), these are worthless if the secrecy jurisdiction doesn’t have the information available to exchange in the first place. Alternatively, secrecy may be achieved through an unwillingness to share information with other jurisdictions – whether through a point-blank refusal to exchange information, or the erection of bureaucratic or other obstacles to information exchange.

The call for action is directed to civil society groups, politicians, economists, corporations, academics, and others, demanding they acknowledge the problem of global financial secrecy and illicit finance, take steps to learn about and understand it, and to take effective measures to tackle them.