During G-20 meeting of Finance Ministers ,in Australia , our Finance Minister of State Mrs Nirmala Sitharaman, categorically opposed an international proposal to make arbitration binding and mandatory in tax treaties . Since, it will otherwise effect sovereign rights of India.
It was emphasised ,in G-20 meet ,that under the mutual agreement procedure (MAP) for tax treaties, the disputes should be resolved by way of a mandatory arbitration .
It is pertinent to note that , recently the Organisation for Economic Co-operation and Development (OECD) issued recommendations so that the issue of base erosion and profit shifting (BEPS) can be checked and thereby multinational companies do not evade taxes in the countries they are operating in.
The suggestions were aimed to formulate international tax rules so that artificially shifting of profits, by companies , to low-tax jurisdictions can be contained as it is effecting countries like India the most.
It was strongly taken by our minister that “while we support the BEPS project, it is necessary to underline that the concerns of developing countries regarding BEPS may be different from those of developed countries” .It was also pointed out that the concerns of developing countries have to be taken into considerations as well before any consensus is finally arrived on this issue .Oflate,some companies operating in India, such as Nokia, have been looking to invoke MAP to sort out disputes with the Indian tax authorities.
The major concern ,as highlighted by the minister ,for developing countries are as below :
- making dispute resolution mechanisms more effective
- the BEPS proposal includes the introduction of mandatory and binding arbitration in the MAP of tax treaties. “This not only impinges on the sovereign rights of developing countries in taxation, but will also limit the ability of the developing countries to apply their domestic laws for taxing non-residents and foreign companies
- BEPS has been a cause of concern for developing and emerging economies for long as it erodes their tax base, depriving them of much-needed resources for developmental activities
However, the proposal of automatic exchange and flow of information between all countries about taxpayers hiding their money in offshore financial centres and tax havens will result into prevention of international tax evasion and avoidance. Such information about unaccounted money in abroad countries will be useful to bring back the black money into India .
Even our Prime Minister Shri Narendra Modi has constituted a special investigation team(SIT) to bring back black money. The SIT is being headed by retired Supreme Court Judge i.e Justice Mr M.B.Shah.
India is hopeful that it will be able to access seamless information about its taxpayers from countries like Switzerland . This exercise will bring back the black money of trillion lakh crore dollars back into India .
Snap taken after getting success in an arbitration matter , handled by Anand Mishra,Advocate, before 3 Supreme Court Judges (retired).
Justice Mr M.B.Shah ( recently appointed as SIT chairman for black money) in middle, to my left is Justice Mr Nanawati ( headed the famous Ghodra Commission) and in right is Justice Mr Thakkar .