For transparency on beneficial ownership

A globally coordinated media investigation, labelled Pandora Papers, reveals many powerful world leaders and elites, including Indians, have used offshore companies and trusts in tax havens to hold their wealth. Not every such action is mala fide or concealed from revenue authorities. But some definitely are. It is welcome that the government has proactively announced that it would investigate the veracity of the reports from Pandora Papers. What this brings out is the imperative for global cooperation to identify actual beneficial ownership of any company or trust, apart from adopting sensible tax policies.

Globally, the need is to have a listing of the actual beneficial owner of any trust or company, as in the UK. Every individual holder of financial securities, whether persons or juridical entities, must have a unique identifier, so that the ultimate beneficiary can be traced even if he or she stays beyond a web of companies/trusts. India‘s common Director Identification Number is a step in the right direction. As is the RBI Legal Entity Identifier for large-value transactions in centralised payment systems. But these will not help, if the trail leads to an opaque entity in some tax haven. The G20 must set a deadline for tax havens. They have to provide information on who the legal owners are as a corollary to the global minimum tax of 15%, a deal that is meant to break tax havens.

Reportedly, the records that consist of nearly 12 million confidential documents from 14 separate legal firms and banks also detail the hidden financial transactions of 300 Indians including former members of Parliament and businessmen accused of economic offences. Many individuals (and companies) create and operate offshore entities for legitimate reasons, and any presumption that all foreign accounts and offshore registered trusts have illicit money would be unfair. Investigations, once begun, must not drag on endlessly – that amounts to harassment. Investigations must lead to prosecution or closure of the case in a reasonable timeframe.

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