Tax information exchange agreements (TIEA) provide for the exchange of information on request relating to a specific criminal or civil tax investigation or civil tax matters under investigation. A model TIEA was developed by the OECD Global Forum Working Group on Effective Exchange of Information. Recently, India has notified the Tax Information Exchange Agreement (TIEA) signed with the Marshall Islands in 2016.

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Features of TIEA between India and Marshall Islands:

• The Agreement enables the exchange of information, including banking and ownership information, between the two countries for tax purposes.
• It is based on international standards of tax transparency and exchange of information and enables the sharing of information on request.
• The Agreement also provides for representatives of one country to undertake tax examinations in the other country.
• The Agreement will enhance mutual cooperation between India and the Marshall Islands by providing an effective framework for the exchange of information in tax matters which will help curb tax evasion and tax avoidance.

Significance of TIEA:

• It provides for exchange of information that is “foreseeably relevant” to the administration and enforcement of domestic tax laws on the Contracting Parties.
• The information provided under TIEA is protected by confidentiality obligations. Disclosure can be made to courts or judicial forums only for the purpose of determination of the taxation matter in question.
• Information requested may relate to a person who is not a resident of a Contracting Party.
• There is an obligation on part of requested Party to gather information if it is not in its possession, notwithstanding that it does not itself need that information. Therefore, no “domestic interest” for tax purposes is required for the provision of information.
• Information is defined in an expansive manner to cover banking details, ownership details of companies/persons/funds/trusts etc.
• Apart from exchange of information, representatives of one Party may be permitted to conduct tax examinations in territory of another party including interviews of individuals and examination of records.

Conclusion:

India has been actively seeking to tax off-shore wealth. It has not only been party to international developments, but has also taken steps like introduction of The Black Money (Undisclosed Foreign Income and Asset) and Imposition of Tax Act, 2015. Indian revenue authorities are significantly adding strength to their armoury through TIEAs and similar measures, which would yield results in the near future.