Finance Minister Arun Jaitley has joined the G20 major economies in fighting money laundering, tax evasion and terror financing while calling upon tax havens to become transparent in this regard and share information.This new mechanism, which will have to be approved by the heads of state and government in November, seeks to combat tax optimization techniques that cause the loss of 240 billion dollars per year in tax revenues.
After a meeting of G20 finance ministers and central bank governors here, attended by Jaitley and Reserve Bank of India (RBI) Governor Raghuram Rajan from India, a joint communique also warned non-cooperative jurisdictions with “defensive” steps.
The G20 leadership said it was important to improve transparency in the global financial system to prevent the misuse of such entities for illegal acts such as corruption, tax evasion, terror financing and money laundering.
It said all countries and jurisdictions must become members of the the Financial Action Task Force on Money Laundering that was established at the G7 Summit of rich nations in Paris in 1989. India is a member of this initiative.
Held on the margins of the World Bank-International Monetary Fund Spring Meetings, the G20 said countries that have not committed to automatic exchange of information by 2017 or 2018 must do so without any further delay.
“We mandate the OECD (Organisation of Economic Cooperation and Development) working with G20 countries to establish objective criteria by our July meeting to identify non-cooperative jurisdictions with respect to tax transparency,” the communique said.
“Defensive measures will be considered by G20 against non-cooperative jurisdictions if progress as assessed by the Global Forum is not made,” it said adding it looked forward to its report before the end of the year for further decisive action.
The communique comes when another global expose has surfaced on people with accounts in tax havens, including top politicians. With 500 Indians, too, named in the list, dubbed the “Panama Papers” a probe is currently on by a multi-agency team.
India does not have any official estimate about the quantum of black money stashed away by its nationals abroad, but unofficial estimate puts it somewhere between $466 billion and $1.4 trillion.
Earlier, during his interaction with US Treasury Secretary Jacob J. Lew, both countries agreed to step up their joint work in pursuing tax evaders and terror financing, steps such as joint tax audits and examination.
“We have enhanced our cooperation in tackling money laundering and combating the financing of terrorism through increased information sharing and cooperation, including a dialogue held recently in India,” the duo said in a joint statement.
“We both agree on the importance of fighting illicit finance in all forms as an important means of tackling global terrorism.”