What is double taxation? Double taxation is the levying of the tax by two or more jurisdictions on the same declared income (income tax), asset (capital tax), or financial transaction (sales tax). This double liabilities is often mitigated by tax treaties signed between the countries. India has a comprehensive DTAA with 88 countries. Which means there are agreed rates of tax and jurisdiction on specific types of income arising in the countries. Income tax act 1991 of India- Section 90 and Section 91 provides specific relief to save them from double taxation. Section 90- for taxpayers paying tax to countries which India has signed DTAA and section 91 provides relief to taxpayers who have paid tax to a country with which India has not signed DTAA. Channel for capital: Participatory note (PN) route: * Channel for return of capital (round-tripping) * Only a part of money taken out of the country remains there. * The money which remains abroad, a part of which is spent in luxury goods and another portion is spent in real estate & other businesses. * Only a fraction goes into bank accounts. * Thus, it is difficult to estimate the amount of black money. * Multinational(MNC) banks are known to have a large no of subsidiaries in tax havens to facilitate client movements of funds. Double Taxation Agreements: Money is also moved by layering. Thus, it is difficult to identify the real beneficiaries of the account. * DTAA is about to declare income of entities so that the tax may be levied in one or other countries nor Both. * As black Income not revealed in either of the two countries so there is no question of double taxation. * This data will not be available to either of the two countries. * DTAA is about white incomes and not black incomes, so it is disingenuous to say that in future no data would be given to us if names are given to court. Recent Examples: Birkenfield- UBS case in US : In spite of non-cooperation by the UBS bank and threats by swiss govt, courts in US pressed ahead ignoring the arguments of secrecy & confidentiality of information. UBS was forced to admit wrongdoing and pay a fine of $780 million and provide a list of 4500 names of US citizens who had an account with it. Credit suisse was also fined $2.5 billion for such fraud. Facts from Wikipedia: 1. As of 2008, there are 327 authorized banks and securities dealers in Switzerland, ranging from the Two Big Banks down to small banks serving the needs of a single community or a few special clients. UBS and Credit Suisse are respectively the largest and second largest Swiss banks and account for over 50% of all deposits in Switzerland; each has extensive branch networks throughout the country and most international centres. Due to their size and complexity, UBS and Credit Suisse are subject to an extra degree of supervision from the Federal Banking Commission. 2. UBS came into existence in June 1998, when Union Bank of Switzerland, founded in 1862, and Swiss Bank Corporation, founded in 1872, merged. Headquartered in Zurich and Basel, it is Switzerlands largest bank. It maintains seven main offices around the world (four in the United States and one each in London, Tokyo, and Hong Kong) and branches on five continents. 3. Credit Suisse is the second-largest Swiss bank. Based in Zurich, it was founded in 1856; its market capitalization (as of 2007) is US$95.2 billion, and the company has about 40,000 employees. Credit Suisse Group offers private banking, investment banking and asset management services.
Posted on: Sat, 01 Nov 2014 16:19:16 +0000
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