The Ministry of Finance issued a press release[1], dated November 6, 2017, wherein it stated that the investigations in the cases of ‘Paradise Papers’ would be monitored through a reconstituted Multi Agency Group (hereinafter referred to as ‘MAG’). Further, Sushil Chandra, the head of the probe panel and CBDT Chairman, on November 14, 2017, said that the MAG on Paradise Papers is looking to obtain more data on those Indians named in the global tax leaks before launching an investigation.[2]

Background:

Whilst investigations regarding cases pertaining to Panama papers are already in full swing[3], the International Consortium of Investigative Journalists on November 5, 2017, released 13.4 million records of a global investigation, dubbed as the ‘Paradise Papers’. These papers reveal the offshore activities of some of the world’s most powerful people and companies. Much like the Panama Papers, the Paradise Papers also present the problem regarding how the big corporates and wealthy people move their money to tax havens through shell companies and trusts created for this purpose.

Global revelation:

Paradise papers comprise of 13.4 million financial documents which is 1.4 TB of data with a plethora of information on offshore investment. These documents were obtained by the German newspaper Süddeutsche Zeitung and exposed by International Consortium of Investigative Journalists.[4] These papers are uncovering how big corporates and billionaires use offshore holdings that evade taxes through transactions conducted in secret.

These papers include documents from nearly 50 years at Appleby, a leading offshore law firm with offices in Bermuda and beyond. Further, the revelations include offshore interests and activities of more than 120 politicians and world leaders, including Queen Elizabeth II. It also exposes the tax engineering of more than 100 multinational corporations that use shell companies in Mauritius and Singapore to reduce taxes.[5]

The Indian response:

These documents have also revealed that 714 Indian companies and individuals were listed in these documents. The Ministry of Finance stated that the Income Tax Department has been alerted about these documents so that appropriate actions can be initiated in that regard. In furtherance to the same, it was also stated that the Government has directed that investigations in cases of the Paradise Papers will be monitored through a reconstituted MAG, headed by the Chairman, CBDT, and would have representatives from CBDT, ED, RBI and FIU.[6]

Also, Sushil Chandra, the head of the probe panel and CBDT Chairman, on November 14, 2017, stated that the MAG is looking to obtain more data on those Indians named in the global tax leaks before launching an investigation.[7]

Long way ahead:

In furtherance to these leaks, a major question arises that whether government and judiciary will conclusively rely on such stolen information for the resolution of tax proceedings. For now, it can be said that it is very early to determine conclusively whether the names of investors mentioned in the Paradise Papers can be convicted on the basis of embezzled information regarding embezzled funds. According to a press release[8] by Ministry of Finance on November 6, 2017, however, as per reports have been submitted by the MAG to the government regarding Panama papers and the government has been actively takeing notes of these leaks and conducting investigations.

The Panama papers mentioned brief particulars of about 426 persons which were Indians or persons of Indian origin and enquiries were conducted for all of these 426 cases and this has led to instigation of 147 actionable cases and 279 non-actionable cases. It takes time to achieve results of this magnitude but it can be hoped that much like Panama Papers, the government will not take the Paradise Papers leak lightly and take swift action will be taken in that regard.