Tax Evasion Current Affairs

Government to launch Project Insight

The Union Finance Ministry is planning to launch ‘Project Insight’ from October 2017 to monitor high value transactions and detect tax evaders using technology with a view to curbing circulation of black money.

To implement the project government has signed contract with Information Technogolgy major L&T Infotect Ltd.  The project will add to list of efforts made by government to curb black money like Operation Clean Money’ after demonetisation, Income Disclosure Scheme, GST implementation, amendment DTAA with other countries etc.

Project Insight

It will use data mining, big data analytics to scoop out tax evaders from social media platforms to deduce mismatches between spending pattern and income declaration. The linking of PAN (Permanent Account Number) with Aadhaar will be key identifier to be used by IT Department to link and analyse various transactions relating to tax payers.

The integrated information technology platform will help in catching tax evaders in non-intrusive manner using technology and without traditional intrusive methods like search and seizure. It will use technology to allow government collate databases of IT forms, IT returns, TDS/TCS statements and Statement of Financial Transactions received from financial institutions.

Its reporting compliance management system will ensure that third party reporting entities like banks and other financial institutions is timely and accurate. It will also set up streamlined data exchange mechanism for other government departments.

It will also be leveraged for implementation of Foreign Account Tax Compliance Act Inter Governmental Agreement (FATCA IGA) and Common Reporting Standard (CRS). IT Department is going to set up new Compliance Management Centralised Processing Centre (CMCPC) for handling preliminary verification, campaign management, generation of bulk letters/notices and follow-up.

Benefits

Project Insights will play key role in widening of tax base and data mining to track tax evaders. It will help in catching tax evaders in non-intrusive manner like search and seizure. It will help to promote voluntary compliance and also enable taxpayers to resolve simple compliance related issues in online manner without visiting Income tax office.

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Money Parked by Indians in Swiss banks hit record low

According to the data released by Zurich-based SNB, money parked by Indians in Swiss banks have nearly halved to 676 Swiss francs (about Rs. 4,500 crore) in 2016. The data release comes ahead of a new framework for the automatic exchange of information between Switzerland and India to check the menace of black money.  SNB (Swiss National Bank) is Switzerland’s central banking authority

Salient Highlights

During 2016, the total money held by Indians fell by 45 % to stand at CHF 675.75 million. This is the biggest ever yearly decline in such funds. Out of the total funds, CHF 377 million was in the form of customer deposits, about CHF 98 million owed to Indians through other banks and CHF 190 million constitutes other ‘liabilities’. The funds reported in 2016 is the lowest amount of funds possessed by Indians in the Swiss banks ever since 1987 and marks the third straight year of decline. Apart from this year, since 1987, the earlier lowest ever figure was recorded in 1995 at CHF 723 million.

On the other hand, the funds held through fiduciaries was nearly $11 million. These funds which used to be in billions till 2007 has been falling since then due to the regulatory crackdown. Similarly, the funds held by Indians with Swiss banks was CHF 6.5 billion (Rs 23,000 crore) at 2006-end. But at present, the funds have come down to nearly one-tenth of that level. Except in 2011 and 2013, the quantum of funds held by Indians has seen a decline.

Swiss banks have said that Indians have parked their money in other global financial hubs like Singapore and Hong Kong after a global clampdown was initiated on the mighty banking secrecy practices in Switzerland.

Background

In November 2016, India and Switzerland had signed a Joint Declaration for implementation of Automatic Exchange of Information (AEOI) in respect of accounts of Indians held abroad. Under the pact, both countries will start collecting data in accordance with the global standards in 2018 and exchange it from 2019 onwards.

Switzerland agreed for the introduction of the AEOI (Automatic Exchange of information) on tax matters under the guidance of G20, OECD and other global organisations. AEOI, based on Common Reporting Standards, when implemented fully would put in place a system wherein bulk taxpayer information will be sent periodically from the source country of income to the country of residence of the taxpayer. It would enable India to get access to information virtually from almost all the countries in the world including offshore financial centres.
In June 2017, Switzerland has ratified automatic exchange of financial account information with India and 40 other countries. This will facilitate Switzerland to share information about suspected black money with India and other 40 nations.

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