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India - US
intergovernmental
agreement on FATCA
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India's avidity for exchange of information

In this era of digitalisation where the world has
become a global village and distances are no longer a
challenge, flow of capital has become easier and
faster. Albeit, this globalisation fuelled by
technological advancement has led to seamless
transfer of goods, services, money and man, the
same has also stimulated international tax evasion
and avoidance, in particular through tax havens and
non-co-operative jurisdictions.
Where the world has recently witnessed the
illegitimate stashing of money in foreign jurisdictions
and banking scandals, co-operation between tax
administrations of different sovereigns has been
considered to be critical in this fight against taxevasion and in protecting the integrity of tax
systems.
A key aspect of such co-operation shall be the
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exchange of information

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The 1998 OECD report 'Harmful Tax Competition: An Emerging
Global Issue'1identified the lack of effective exchange information as
one of the key characteristics of harmful tax practices and
recommended member countries to remove impediments to the
access of bank information.
The scope of national tax authorities is restricted to the territorial
limitations of the country and hence their powers are also restricted.
Thus international co-operation and mutual assistance for tax
purposes is most important which makes exchange of information an
effective worldwide system for recovery of taxes in cross-border
scenarios.
The G20 leaders stated their commitment to the automatic
exchange of information and called for a new single global standard
(Multilateral Convention on Mutual Administrative Assistance on Tax
Matters) for automatic exchange of Information. Many countries
namely Austria, Luxemburg, Singapore, Switzerland etc have signed
the Multilateral Convention on Mutual Administrative Assistance in
Tax Matter designed by Organisation for Economic Co-operation and
Development ('OECD'), whichinter alia, allowed for exchange of
information on request.

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United States of America ('US') has introduced Foreign Accounts Tax Compliance Act ('FATCA'), aper
seunilateral action of the US government to combat the menace of undisclosed money and wealth of US
persons2stashed in foreign jurisdictions. FATCA at the outset is an attempt of US to fight against the
instances of tax evasion by US taxpayers through concealment of their direct or indirect interest in
offshore financial accounts and assets.
Background - FATCA
FATCA aims at tracking the undisclosed investments made by the US persons in other jurisdiction and
thus bringing the undisclosed income and assets to US tax net. The primary objective of this US global
law is to identify the US persons, who have evaded the US taxes by stashing their money and wealth in
financial accounts maintained outside US.
The aforesaid law was introduced with a dual approach, casting obligation on US persons on one hand
and on the other making it mandatory for other sovereigns for effective exchange of information
primarily related to assets and accounts directly or indirectly owned by US persons.
At the first instance, the aforesaid law makes it mandatory for the US persons to report 3to Internal
Revenue Service, US ('IRS') any direct or indirect holding or interest in any of the offshore accounts or
assets, non-compliance of which may attract hefty penalties. Howbeit, the anti-evasive US law is mostly
discussed, debated and criticized round the world for the obligation it casts at the secondary level. FATCA
aims at tracking US persons and their undisclosed offshore financial assets and accounts, by way of
effective exchange of information with the rest of the world. It does this through the imposition of strict
Customer
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91-11- obligations on foreign government or foreign entities, non-compliance
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monitoring
of which

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