India presses for automatic exchange of tax info at G-20

Worried over the spurt in cross border transactions and tax evasion, India has pressed for automatic exchange of information among the countries to deal with the menace.

"India believes that Automatic Exchange of Information is one of the most effective ways to improve voluntary tax compliance and decrease tax evasion and there is a need to make it obligatory," Finance Minister Pranab Mukherjee said at the meeting of G-20 Ministers.

The G-20 nations, a grouping of rich and developing countries, he said, should impress upon tax havens and those believing in banking secrecy not to give such exemptions that neutralise the efficacy of global Convention on tax matters.

The Multilateral Convention on Mutual Administrative Assistance provides member countries mutual administrative assistance in tax matters.

"To make the Convention really effective, the G-20 should give a call that the Convention is signed by Offshore Financial Centres and countries traditionally believing in secrecy of bank laws and that country should not give exemptions which will eclipse the efficacy of the Convention," Mukherjee said.

With the relaxation of foreign investment policies, he said, "there has been a great increase in cross border transactions which bring into focus issues of tax evasion and illicit flows that pose serious challenges to the world economy".

Speaking at the Financial Action Task Force (FATF) Ministerial meeting here, Mukherjee called for a transparent financial system and said that no country can alone meet the threats of money laundering and terrorist financing.

"There is an ever growing need for international cooperation to deal with these threats... We hope the new standards will improve the domestic and international cooperation amongst the agencies to combat these crimes," he said.

Mukherjee also called for a system that would prevent and detect the misuse of formal and informal channels and also to determine the beneficial owners.

The FATF is an inter-governmental body set up by the G-7 nations for creating global policies and framework to combat money laundering and terror financing.

India became the 34th member country of FATF in 2010 and Mukherjee is the first Indian minister to participate in the conference.

Besides, at the meeting of the G-20 Ministers, Mukherjee said the global financial system continues to face a complex set of challenges.

"While some countries and regions are recovering from the crisis of 2008, others are confronting renewed turbulence. The uncertain and uneven recovery has led to calls in some quarters to weaken financial reform initiatives," he said.

Mukherjee further said a coordinated regulatory response is essential to tackle the volatile financial markets and anemic growth prospects worldwide.