New Delhi, April 5, 2018

Concerned over recent cases of high-income individuals such as Nirav Modi and Vijay Mallya escaping from the country and settling abroad, the CBDT has formed a committee to study these cases and prepare an action plan for due revenue to be extracted from them and ensure that the tax authorities are not left in the lurch.

A five-member ‘working group’, led by a joint secretary-rank officer of the Union finance ministry, has been tasked to go into the “taxation aspects” of such high-net-worth individuals (HNWIs).

According to the Central Board of Direct Taxes (CBDT) order accessed by PTI, the group will “formulate India’s position for various aspects related to taxation of migrating HNWIs” and has been created on the directions of CBDT Chairman Sushil Chandra. The board, which is the Income-Tax Department’s policy-making authority, said it is creating the new team as “in recent times there has been a trend of HNWIs migrating from their country of residence to other jurisdictions”.

Such ultra rich people, it said, pose a “substantial tax risk since they may treat themselves as non-residents for taxation purposes in the first jurisdiction even through they may have strong personal and economic ties with that jurisdiction”. The group will also “make recommendations for policy decision in respect of tax risks of the migrating HNIW population”. It has been empowered by the CBDT to hold consultations with various wings of the I-T Department such as investigations, foreign taxation, tax deducted at source (TDS) and others so that a comprehensive policy is evolved.

A senior official said the group was created keeping in mind recent cases of high-income people such as diamantaire Nirav Modi, his uncle and Gitanjali gens promoter Mehul Choksi and liquor baron Vijay Mallya escaping from the country and jeopardising the taxman’s efforts to extract due revenue from them. “It is a case like the proverbial once bitten and twice shy. By the time, the department and other agencies get hold of some evidence against such people, it is found that they already had parked themselves in a foreign location where they had deep business ties.

“To get them back into the country by way of deportation or extradition, freezing their assets and realising taxes then becomes a very difficult task. The committee will try and get some answers in this context,” a senior official said. The cases of Modi, Choksi and Mallya are being probed by multiple investigative agencies on charges of corruption and default of bank loans, money laundering and tax evasion. The official said there are few more cases like these which the agencies are also probing.

[The Financial Express]