G20 endorses India's stance on black money

G20 endorses India's stance on black money

In a major gain for India, the G20 summit today endorsed the government's line on the need for transparency and disclosure of tax information as Prime Minister Narendra Modi sought a new global standard on automatic exchange to tackle the issue of black money.

Raising the pitch on the black money issue, Modi in his intervention at the summit of the Group of 20 industrialised and major emerging economies called for close global coordination to address the challenge posed by it.

The new standard will be instrumental in getting information relating to unaccounted money hoarded abroad and enable its eventual repatriation, Modi said, utilising the forum of G20, which accounts for 85 per cent of world's GDP.

Modi while voicing India's support for it urged every jurisdiction, especially tax havens, to provide information for tax purposes in accordance with treaty obligations.

He also extended India's backing for all initiatives to facilitate exchange of information and mutual assistance in tax policy and administration.

The prime minister while flagging his concern over cross border tax avoidance and evasion also noted that increased mobility of capital and technology have created new opportunities for avoiding tax and profit sharing.

The prime minister made the remarks at the plenary session on the subject of "Delivering Global Economic resilience" on the second and final day of the summit held at the Brisbane Exhibition and Convention centre.

He also expressed the hope that Base Erosion and Profit Sharing (BEPS) system would fully address concerns of developing and developed economies.

BEPS is a technical term referring to the effect of tax avoidance strategies used by multinational companies on countries' tax basis. BEPS is known more commonly as "Transfer pricing".

This term is used in a project headed by the OECD that is said to be an attempt by the world’s major economies to try to rewrite the rules on corporate taxation to address the widespread perception that the corporations don’t pay their fair share of taxes.

The prime minister also said that increased mobility of capital and technology have created new opportunities for avoiding tax and profit shifting.

Modi underpinned the need for the world community to take coordinated decisions although each country has its domestic priority.

"Need for policy coordination among major economies remains strong," Modi said.
"Close coordination is important not just for addressing the challenge of black money but also security issues like terrorism, drug trafficking and arms smuggling," he said.
Touching upon the resilience of the financial system in the world, Modi said it will also depend on cyber security.

At the end of the two-day summit, a three-page communique was released which welcomed the "significant progress" on the G20/OECD Base Erosion and Profit Shifting Action Plan to modernise international tax rules.

"We are committed to finalising this work in 2015, including transparency of tax-payer specific rulings found to constitute harmful tax practices," it said.

Briefing newsmen, Railways Minister Suresh Prabhu and External Affairs Ministry spokesperson Syed Akbaruddin said the reference to transparency, which was not there in the draft communique, was incorporated in the final communique after Prime Minister's strong intervention at plenary session.

After Prime Minister's intervention, several countries, notably Brazil and South Africa wanted a reference to be made to transparency in the final communique, Akbaruddin said.

"After the prime minister's own and strong intervention (on repatriation of black money), several countries shared his sentiments and wanted the views to be reflected in the final communique," he said.

"We are taking actions to ensure the fairness of the international tax system and to secure countries' revenue bases. Profits should be taxed where economic activities deriving the profits are performed and where value is created," the G20 communique said.

"The G20 has sent a strong message on taxpayer-specific ruling," Dr Usha Titus, who assisted Prabhu, said. The Railways Minister was Modi's sherpa at the deliberations.
Prabhu said Indian concerns on "jobless growth" prospects and the need to create more jobs to kickstart the world economy were also reflected in the G20's final document.

Modi also proposed to the G20 to set up a global virtual centre for clean energy research and development.

"Our actions to increase investment, trade and competition will deliver quality jobs. But we must do more  to address unemployment, raise participation and create quality jobs," the communique said.

Ahead of the summit, Modi felt that focusing on transforming the quality of life of people and not just on issues like the health of the financial markets was necessary for creating employment-generating economic growth.

At today's news conference, Prabhu said that development issues like creating more jobs was occupying a "key place" at the G20, adding that tackling unemployment was of prime concern for the Indian government.

"Creating more jobs is now coming at the centre of discussions (of G20)," he added.
G20 host and Australian Prime Minister Tony Abbott has vowed a crackdown on tax evasion by MNCs and wanted the G20 countries to have intense cooperation in this regard.

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