VIA Economy and Finance Forum organized a program on “The PANAMA PAPER – The Largest Leak in History” which was conducted by renowned Chartered Accountant and Economist, Dr Tejinder Singh Rawal at VIA Hall.
Dr T S Rawal said that on 3rd April 2016, the world read about the largest data leak in history. The Panama Papers exposed the rich and powerful people hiding vast amounts of money in offshore accounts. In order to avoid money being transferred to tax havens, the Government must move to a simple tax regime with lower compliance costs.”
Dr T S Rawal said that the Government should introduce lower tax regime minimise rules and regulations and bring about more transparency. This would at least provide incentives to lower the amount of money being transferred in an illegal manner.
Dr T S Rawal said that the issue gained popularity when an international coalition of over 100 media groups recently published what was reportedly an extensive probe into the dubious offshore financial deals of prominent people across the globe who used tax havens to hide their wealth and these documents were leaked from Mossack Fonesca – a Panamanian law firm (which is world’s fourth biggest provider of offshore services) by an anonymous source by German daily Sueddeutsche Zeltung and shared with media worldwide by the International Consortium of Investigative Journalists (ICIJ).
The people it allegedly exposed ranged from political leaders like Russian President, Vladimir Putin; Pakistan Prime Minister, Nawaz Sharif; President of Argentina, Iceland’s Prime Minister and the King of Saudi Arabia as well as 500 Indians including Bollywood actors. This has threatened to shake the political and economic landscape of the world.
“It was done through shell companies, initially incorporated without significant assets or Operations to disguise ownership or other information about the funds.” Dr T S Rawal said that the shell companies offered a high degree of anonymity that allowed a person business activities to remain untraced by the authorities as well as rivals in business and personal life. It would be very difficult for a business concern shrouded in such secrecy to be prosecuted by the Government officials.
The Panama Papers data leak is just the tip of the iceberg. The papers reveal that countries with much simpler tax laws, lower costs of compliance and a stronger administrative capacity to enforce laws than India have not been able to prevent the use of tax havens,” said Dr T S Rawal.
He said that in India, tax rates were higher the system was complicated and capital controls restricted foreign financial transactions. Tax havens were more likely to be used not just for illegal activity but even for legitimate businesses.
We rank 157 in the ease of paying taxes. Further, the effective tax on profit is higher. The corporate tax rate and the dividend distribution tax put together make the tax rate on profits nearly 50 per cent,” he added. On top of that the capital gains tax made financial transactions even more unattractive. This regime was made more tortuous by an onerous set of capital controls.
As a consequence, companies operating globally had every incentive to set up companies in such jurisdictions or tax havens.
“Rationalization of capital controls should be a top priority.” The leak showed how offshore tax shelters could be exploited by the rich and the famous despite all the safeguards put in place by their respective countries. It also revealed as to how the prominent people across the world connived with major banks to create hard-to-trace companies.
Earlier, Mr Ashit Sinha, Vice President – VIA welcomed Dr T S Rawal. Mr O S Bagdia, Chairman – VIA Economy & Finance Forum gave his opening remarks. Mr Anil Parakh, Vice President – VIA delivered the welcome address. Mr Arun Bafna, Convener of the Forum conducted the proceedings, summed up the presentation and also proposed a vote of thanks. Prominently present were Mr Prafull Doshi, Immediate Past President – VIA, Mr M G Jawanjar, Member of the Forum, Mr Naresh Jakhotia, Convener – VIA Taxation & Corporate Law Forum,