Where does India stand in the Paradise Papers saga?

Other loopholes in the domestic tax law as well which government would do well to focus on, says legal expert

Jersey-themed fridge magnets depicting a Jersey cow are displayed for sale in St Helier, on the British island of Jersey, on November 9, 2017.
The Channel island of Jersey has come under the spotlight with the publication of the "Paradise Papers", highlighting its status as a tax destination for multinational companies. A Crown Dependency, Jersey is not part of the United Kingdom and does not have any representatives in Westminster, instead being administered by a local assembly. However, it still recognises Queen Elizabeth II as its head of state. / AFP PHOTO / OLI SCARFF
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Abhay Sharma, a partner at the Indian law firm Shardul Amarchand Mangaldas, elaborates on the use of tax havens in India.

Are the Paradise Papers' revelations putting pressure on the Indian government to take action?

If you look at the Paradise Papers, it does allow for the government to now ask some of their counterparts in the jurisdictions to provide further details of the transactions that these individuals or these companies may or may not have undertaken.

Why is there a movement towards cracking down on tax havens?

Globally there has been a trend where now even cases of tax structuring are being looked at and there is a concerted movement of which India is a part. The OECD is spearheading this, where we are looking at avoidance in a completely different light, where we are looking at the country's tax base not being eroded.

What percentage of the flows into tax havens from India are legal or illegal?

One cannot possibly hazard a guess as to how much has been illegal and how much has been legal.

At what point do these transactions become illegal?

When looking at what classically constitutes tax evasion, either there is a complete non-disclosure of income back in India, there is a laundering of money or it is a kickback of some sort. But if an individual or a company uses a jurisdiction to structure their taxes legitimately in a particular way, that is something which is not illegal per se.


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Why is this so widespread?

There was a time not so long back when the Indian courts themselves opined that it's [up to] each individual or taxpayer to plan his affairs in a way that can minimise his own tax incidence.

Why is India's government keen to tackle this issue now?

The government is always hungry for revenue, and naturally so. When one is talking specifically about offshore jurisdictions, it also becomes a largely political issue. It's obviously a challenge and the government cannot accomplish its goals overnight. Enforcement may not be as easy as one would like. Of course, they should focus on these overseas assets, but there are other loopholes when it comes to the domestic tax law as well which they would do well to focus on.