Vijay Mallya Current Affairs

CBDT forms Working Group to assess tax risks of High Net Worth Individuals migrating abroad

The Central Board of Direct Taxes (CBDT) has constituted 5-member working group (committee) to examine taxation aspects related to High Net Worth Individuals (HNWIs) who are migrating abroad to other jurisdictions. The Working Group will be headed by Pragya Sahay Saksena, a joint secretary with Foreign Tax & Tax Research Division of CBDT.

Key Facts

The working group will make recommendations for policy decision in respect of tax risks of migrating HNWIs. It has also been empowered to coordinate with various divisions and directorates of CBDT to formulate India’s position for various aspects related to taxation of migrating HNWIs. The CBDT has termed such HNWIs as substantial tax risk as they may treat themselves as non-residents for taxation purposes in India.

Background

In recent times, there have cases of HNWIs migrating from residence of their country to other jurisdictions. Such HNWIs pose substantial tax risk as they treat themselves as non-residents for taxation purposes in first jurisdiction even though have strong personal and economic ties with that jurisdiction.

The Working Group has been constituted for examining the taxation aspects of such HNWIs. Its announcement comes at the time when there are concerns over recent cases of HNWIs such as Vijay Mallya and Nirav Modi fleeing from country amid ongoing investigations against them.

According raw data analysis by Morgan Stanley Investment Management, In 2017 alone, 7,000 millionaires left India without paying taxes. It makes India top of the exodus charts of HNWIs causing huge loss the exchequer. The data shows that 2.1% of India’s rich left country compared with 1.3% for France and 1.1% for China.

Central Board of Direct Taxes (CBDT)

CBDT is nodal policy-making body of the Income Tax (IT) department under Finance Ministry. It is a statutory authority established under The Central Board of Revenue Act, 1963. It is supreme body in India for framing policies related to direct taxes. The composition of CBDT includes Chairman and six members.

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Cabinet approves Fugitive Economic Offenders Bill, 2018

The Union Cabinet has approved introduction of Fugitive Economic Offenders Bill, 2018 in Parliament. The bill proposed by Finance Ministry aims to curb practice of evading criminal prosecution by economic offenders (wilful defaulters) who flee from country to evade clutches Indian law by remaining outside jurisdiction of Indian courts.

Features of Bill

It defines fugitive economic offender (FEO) as any individual against whom warrant for arrest in relation to scheduled offence (enlisted in the this law) has been issued by any court in India, but he leaves or has left India to avoid criminal prosecution or  refuses to return to India to face criminal prosecution.

The onus is on authorities to prove that an individual is a fugitive economic offender. It gives government right to confiscate property of such economic offenders in India and abroad. Its provisions are also be applicable on proxy-owned properties of economic offenders.

It is applicable in cases where total value involved in such economic offences is Rs.100 crore or more. It keeps banks and other financial institutions at Centre and provide help to them recover amount.

It establishes Special Court under the Prevention of Money-laundering Act (PMLA), 2002 to declare a person as FEO. The special court will also appoint ‘administrator’ to oversee confiscated property. It will be responsible for disposing of confiscated property and t property will be used to satisfy creditors’ claims.

It debars fugitive economic offender from defending any civil claim at the discretion of any court including High Court. If prior to the declaration, the alleged FEO returns to India and submits to the appropriate jurisdictional court, proceedings under this Act will cease by law.

Background

There have been several instances of economic offenders (eg Vijay Mallya and Nirav Modi) fleeing country to evade clutches Indian law to remain outside jurisdiction of Indian courts. The absence of such offenders from Indian courts has several deleterious consequences. It hampers investigation in criminal cases, wastes precious time of courts of law, undermines rule of law in India.

Further, most such cases of economic offences involve non-repayment of bank loans thereby worsening financial health of banking sector. Moreover, existing non-coherent civil and criminal provisions in law are not entirely adequate to deal with severity of problem. This bill will provide effective, expeditious and constitutionally permissible deterrent legal teeth to enforcing agencies to ensure that such actions of FEO are curbed.

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