Black money law easier said than done

Tax officials said the law can be passed,but what next is the issue.

In trying to placate Baba Ramdev,the government may have committed to enacting a law calling all black money a national asset but confiscation of funds stashed in tax havens will not happen just because India wants it. Tax officials said the law can be passed,but what next is the issue.

For,foreign governments,including tax havens,may assert their sovereignty when India takes the next step of trying to bring such money back home. Especially Switzerland,because its Swiss banks that are said to hold much of this wealth.

It has time and again made it clear it will not allow fishing expeditions meaning India cannot approach it with a sundry list of names and demand their bank details. The government has already signed a revised double tax avoidance agreement (DTAA) with Switzerland,but it is yet to be ratified by the latters Parliament. Till it is ratified,which will take at least six months or so,even exchange of information is not easy, said an official.

Global financial experts said the act of declaring black money as a national asset is tantamount to national expropriation. Tax havens exist within international laws. What India wants does infringe on international law, said an expert with a global financial institution. Would we want some other country to expropriate accounts opened in India because the effective tax rates are lower here?

The revised DTAA with Switzerland will allow exchange of information between the two countries within the OECD (Organisation for Economic Cooperation and Development) framework. But India will have to provide

specific and comprehensive information about tax evaders to get their bank details. The problem is we dont know who has money stashed away in Swiss banks. Had we known,we would have initiated action, said a tax official.

A lot,however,depends on Indias domestic climate and the clout it enjoys with the administration at the tax havens, the expert said.

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The US and the UK have been able to tap into Swiss bank accounts of tax defaulters in their respective countries,and have even significantly added to their direct tax kitty.