India calls for global co-operation to tackle illicit financial flows globally

India has called for enhanced international cooperation to address illicit crossborder financial flows, tax evasion and "hawala" transactions as it stressed that the world's governance architecture for cooperation in taxation has not kept pace with globalisation.

"Raising awareness on the important issue of International Cooperation on Tax matters is a challenging task. This is so because the global governance architecture for cooperation in taxation has not kept pace with the pace of globalisation," India's Permanent Representative to the UN Ambassador Syed Akbaruddin said here.

Participating in an informal workshop on International Taxation here on May 11, Akbaruddin said while multilateralism, which is seen faltering on many fronts, remains conspicuously absent in matters of international tax cooperation.

"There is a need for enhanced international cooperation to address illicit cross-border financial flows, tax evasion, trade mis-invoicing, and money transfer without money movement colloquially known as 'hawala' transactions in our part of the world," he said.

Akbaruddin emphasised that tax revenue is the lifeblood of the State and with integration of economies in a globalised world, actions on taxation in one country affect practically everybody, within and across borders.

"It has direct relevance to the illicit financial flows, especially out of developing countries as well as in creating the right international system for the movement of finance,"

he said.

However, there are limits to what can be done by domestic policy alone, he said underscoring the need for necessitating strengthened international cooperation in tax matters.

"The figures of the financial flows on account of use, misuse and abuse of loopholes in national and global financial structures are staggering," he said, lamenting that multilateral organisations are on the sidelines of international tax cooperation.

Voicing India's support for an open, transparent and multilateral platform for global norm-setting on taxation, he said the ongoing work under Organisation for Economic Cooperation and Development (OECD) and G-20 should not mean that meaningful and complementary work on taxation cannot be done in the UN.

"We strongly feel that everybody, every country, rich or poor, big or small does have a right to an inclusive place at the table to decide on an issue as important as international cooperation on tax matters. On such issues restrictive surrogates are no substitutes for representative fora," he said.

He cited the example of the landmark reform of Goods and Service Tax undertaken by the Indian government. Akbaruddin told the UN meeting that all other indirect taxes would be subsumed in the GST, which will come into being from July this year. Preliminary studies indicate that the growth in GDP can be between 2-2.5 per cent with the implementation of a welldesigned GST and exports can be increased between 10-14 per cent.

Akbaruddin said while developing countries like India are taking measures to improve their domestic tax revenue base, globalisation demands a more participatory, transparent, accountable and democratic global governance structure on tax issues.

"And the UN under its new Secretary General and his team must decisively and with determination support efforts to reconfigure and realign international decision making with contemporary realities. This august body's universality and legitimacy bestows upon it this responsibility and it must deliver," he said.

He noted that while exploring ways of strengthening international tax cooperation, the lowest hanging fruit comes to mind is strengthening of the UN Tax Committee, whose membership can be increased from 25 to say 35 with increased representation of developing countries.

"We are living in times when there is a real momentum for change around us. Food, fuel, water and a healthy environment can hardly be secured without making a comprehensive reform of global regimes. Be it trade, investment, finance, taxation or technology frameworks, they all need a more level playing field for participation of developing countries," he said.