India to set up overseas tax units in Switzerland, 13 more countries

The Indian government finally plans to set up an Income Tax Overseas Unit (ITOU) in Switzerland, said to be one of the biggest destinations for ill-gotten and concealed wealth from the country.

The government has established 10 ITOUs at its missions across the globe and plans to add another 14 – including one in Swizterland – soon. The units are expected to monitor the illegal transfer of funds to these countries from across the globe by Indians and also coordinate between tax authorities in India and in those nations.

Income tax officers, designated as 'first secretaries,' are attached to Indian missions in different countries to man the ITOUs. The decision to enhance the number of ITOUs was taken by the finance ministry, which has sent the proposal to the ministry of external affairs. The government had in its budget in March enhanced the allocation of funds for these units to Rs18.2 crore from Rs2.41 crore last year.

ITOUs have already been set up in countries such as the US, the UK, the UAE, Mauritius, Singapore, France, Germany and Japan. India has signed double taxation avoidance agreements with more than 80 countries, including Switzerland, the UAE and Mauritius.

The UPA government has been facing a lot of pressure from the opposition parties and from civil society groups in recent months on the issue of black money. The opposition led by the BJP crippled both the houses of parliament on Tuesday, demanding detailed discussion on efforts made by the government to bring back black money.

Meanwhile, a high-level government committee on measures to tackle black money in India and abroad has suggested the creation of a strong Lok Pal to curb corruption. ''Institutions of the Lok Pal and Lokayukta may be put in place at the earliest at the centre and in states, respectively, to expedite investigations into cases of corruption and bring the guilty to justice,'' said the committee headed by the chairman of the Central Board of Direct Taxes.

The panel has suggested a five-point strategy to curb black money: prevent its generation, discourage its use, detect black money, an effective investigative machinery and effective adjudication.

It has also called for a compliance scheme that would encourage Indian residents to bring back assets stashed abroad. The committee also wants the government to beef up the 'know your customer' norms for foreign institutional investors and participatory notes, as the existing requirements do not provide details about the ultimate beneficiaries of these instruments.