The Panama Papers exposé that features over 500 Indians linked to offshore firms is bound to open up a “can of worms” and lead to several angles of investigations for Indian authorities, say tax and legal experts.
The leak of more than 11.5 million documents (covering 40 years) from the files of Panama-based law firm Mossack Fonseca and the resulting global controversy is, however, unlikely to dent New Delhi’s resolve to bring back undeclared funds stashed abroad, they said.
This is despite the fact that the revelation came just six months after a 30-day compliance window for declaration of offshore assets ended on September 30, 2015. This window had brought just ₹3,770 crore from 637 declarants.
Tax experts said Indian income tax and RBI authorities will investigate possible violations, including round-tripping of monies, non-declaration of foreign assets (funds/accounts) maintained abroad and FEMA violations centred around overseas remittances.
“This is a serious issue. Life is going to become difficult for both –– the tainted Indian individuals and the Indian tax authorities,” Girish Vanvari, Head of Tax for KPMG in India, told BusinessLine .
Among those whose names have cropped up in the leaked documents are corporate leaders (including DLF promoter KP Singh and Indiabulls owner Sameer Gehlaut) and leading celebrities (including actors Amitabh Bachchan and Aishwarya Rai).
Vanvari said that the Indian individuals named in the global list of secret firms in tax havens may have to “explain the source of money” and whether they had declared these assets to the tax authorities.
In recent years, income tax returns require resident individuals to declare ownership of foreign assets, including bank accounts.
For Indian tax authorities, the ground work done in recent years in terms of signing tax information exchange agreements (TIEA) with several tax havens may help.
While India does not have a TIEA with Panama, it does have similar agreements with tax havens such as British Virgin Islands (named in the latest exposé), said tax experts.
Ramesh Vaidyanathan, Managing Partner, Advaya Legal, said authorities must not rush to conclusions, as some accounts could have been set up in bonafide manner. Aseem Chawla, Partner, MPC Legal, said the manner in which Indian authorities engage with their counterparts in Panama and lean on their experience of dealing with stolen information in HSBC cases will be on test.
Also read: Who, what, where, why: Panama Papers