THE Multilateral Convention on Mutual Administrative
Assistance in Tax Matters which India had signed in January this year,
has finally been ratified by India, which has deposited the Instrument
of Ratification last Wednesday. By this, India has become the first non-OECD, non-Council
of Europe country to become a party to the Convention as amended by the 2010
Protocol.
The Convention was amended to respond to
the G20 Summit call in 2009 for developing a broader multilateral approach
to improve the effectiveness of exchange of information, co-operation between
the countries in the assessment and collection of taxes, with a view to combating
tax avoidance and evasion.
By signing the Convention, India and the other
33 signatories encourage more countries to join, sending a strong signal that
countries are acting together to ensure that individuals and multinational
enterprises pay the right amount of tax, at the right time and in the right
place. Many more countries are expected to sign the Convention in future. This
provides for a wider network of countries co-operating in Exchange of Information
and assistance in Tax Collection etc. Out of the 34 signatories, 13 (including
India) of them have ratified the convention so far. India has become the thirteenth
country to join the Convention.
Salient features of this multilateral convention are:
• It is based on international standard of transparency and exchange of information.
• This instrument is multilateral and a single legal basis for multi-country
co-operation as against the DTAAs/TIEAs which are bilateral. It provides for
an extensive network and there will be consistent application of provisions
leaving limited scope for deviation.
• It provides extensive forms of co-operation among the signatories on all
taxes.
• The Convention allows Exchange of past information in criminal tax matters.
A Party to the Convention is compulsorily required to Exchange the past information
in criminal matters for at least three years prior to becoming party to the
Convention.
• It not only facilitates the exchange of information, but also provides
for assistance in the recovery of taxes. This will give a fillip to the efforts
of the Government in bringing the Indian money illegally stashed abroad.
• It provides for simultaneous tax examinations and participation in tax
examinations in other countries. This provides for examination of tax affairs
of the taxpayers simultaneously in their own territory and share the relevant
information to each other. This allows tax officials to entering into the territory
of the other country to interview individuals and examine records.
• The convention explicitly provides for Automatic Exchange of information
and Spontaneous Exchange of information.
• It provides for service of documents in other country.
• The information received under the Convention can also be used for other
purposes besides those related to tax co-operation, for example to counter
money laundering with the approval of the supplying state.
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