A Perspective on tax havens for Indians

The tax havens must be in a position, as a sovereign nation, to resist the demands for enquiries or information that come their way from other nations

It is no longer enough for tax haven bankers to wear bespoke suits and then take your assets and park them in a secure location, away from the taxman’s and other people’s prying eyes, and expect you to be content. The assets have to work for you, and here again, placing them out on interest (compound or simple) simply does not cut the ice any more. They have to be not just invested in some business somewhere—preferably in your own country or a part of the world where you can exert some sort of back-room control over it—but they also have to be invested in such a way that the ownership is not traced back to you. Name the large global corporation, and at some level or the other, you will find that they are there in a tax haven—paying lesser tax than you and I do. I did not say this—Warren Buffet—the global investor, did.

This is where the more versatile and modern tax havens come into their own mould. Apart from functioning only as traditional banks would in the traditional tax havens like, say, Switzerland, they also have to provide a full range of additional services, which include registered officers, shareholders, legal title without footprints, and much more. In other words, the tax haven has to function with absolute secrecy and confidentiality to enable the investor to not just secure his assets, but also control downstream business activities, and at the same time ensure that the services are provided at competitive prices. Here again, the Swiss have traditionally been a higher priced jurisdiction.

And then of course, the tax havens must also be in a position, as a sovereign nation, to resist the demands for enquiries or information that come their way from other nations. So, for example, if India asks the Isle of Man for details of Indian origin assets held by them, then the Isle of Man (or any other tax jurisdiction) must be in a position to deny this information with righteous indignation and in flowery English to boot, with the full strength of whatever legal system they follow supporting them. Tax havens, in short, work as ultra secret jurisdictions which have no compulsions in doing anything for anybody, as long as they see a profit in it for themselves, and to do that they have lock-ins and tie-ups with the best of banks, consultants, accounting firms and corporates globally.


There is no single definition, but at its simplest, a tax haven is a territory (could be a house on a street, a part of a city, a city, a state, a country) where certain taxes are either not levied at all, or are levied at a very low rate. In addition, they offer total secrecy, as well as ample processes to achieve this. Tax havens are available for individuals, groups or corporates. A building in Cayman Islands, Ugland House in Georgetown, whose sole tenant is the international law firm Maples & Calder, has about 20,000 distinct corporate entities registered at this one address. Likewise, there are similar buildings in Wilmington, Delaware, USA, where thousands of companies stand registered at one address. Are these tax havens? You decide. However, unlike in other cases where multiple companies have their registered office at one address, in these cases the actual details of who really is the beneficiary owner of said companies usually remains hidden behind a cloak of absolute secrecy. That service, of providing not just a banking arrangement in a tax free environment, but also full corporate adherences is what a tax haven is. This also includes the option of slipping out of one tax haven into another, on a regular or “on-demand” basis, to further hide footprints. Minimum ticket size used to be around $50 million till a few years ago, but days are bad it seems, and agents are now willing to be of service for even a few crores.

Are Indians, and Indian companies’ clients, customers in such tax havens? Put it this way—there is hardly a foreign bank in India, and more than a couple of private banks too, who will not provide such services to their really high-roller clients. Likewise, there appears to be no dearth of companies, especially 100% wholly-owned subsidiaries registered in India, whose parent companies are registered in one or more of these tax havens.

The list of foreign banks which have set up non-retail banking operations in India is not just indicative, but very illuminating, in this context. What is the answer to the question? Yes, of course, Indian clients have been rated amongst the biggest. This is why any attempt to control the tax haven business in India is met by squeals of protests from a variety of impacted interests.

Tax havens are a complex subject, and a short article like this cannot even start doing justice, so it is better to go through the acres of material available on the subject online on the internet and in some wonderful books on the subject. One such book is TREASURE ISLANDS by Nicholas Shaxson. The mainstream media does tend to be a bit wary about the subject. This is because ownership and control of mainstream media is often routed through such tax havens. In my case, the interest really started way back in 1982, when while working on a ship, we tried to figure out WHO the owner really was—and came to a dead-end at something called “A Delaware Corporation”. A further exposure to ship-broking, commodities trading and payment processing brought more facts into play. It is a fascinating subject, once designed to provide the grease to international commerce, but now totally in control.

Which is, frightening, especially for countries like India, which have, time and again, as history shows, fallen to invaders with stronger not just military but economic might—and no wonder our prime minister appears to be taking this issue on so strongly.

(This is the concluding part of a two-part series)

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Nagesh Kini FCA

5 years ago

Notwithstanding all the Treaties and Agreements, it is the will, political or otherwise, that is not forthcoming in India. Had India gone the American and French ways the List of Account holders as well as the amounts could have been repatriated long back. The Govt. claims that the Indo-Swiss Agreement "is prospective" meaning thereby that existing and/or past information cannot be sought. This is a meaningless argument. Most of the monies would have moved out by now!

Vinay Joshi

6 years ago

Mr. Veeresh,

Forget the books - you can well write one!

How US got back its evaded taxes & info from Swiss banks? or others.

US was hunting MNC's, which not only avoided but evaded taxes on their legitimate profits! That's all!

But in Indian scenario we subsume that TxH, politicians park & least bothered about incremental as long as it can be routed back safely!

Why is the Indian Govt. dithering on this issue? Why sundry 200/300 mn$ talked thro' LTGB?
It's the only amount!

Is there willingness of the Govt to ferret out min 100/500 Bn$? Stashed!!
Who will bell the cat?

Mr. Veeresh, we can only fight amongst ourselves, there can be war of words, copious emancipation of views, expected, so on .

The illgotten wealth stashed will have no forbearance unless & until legislative measures are in place!

If DTAT is not a legislated a law - how can you prosecute a culprit?

PMLA, enacted a law - as of now how many charged under the provisions of the said law? One single frivolous case!

The FinMin concurs with Law Ministry that no new laws required, only to strengthen PMLA!!??

Read between the lines.




In Reply to Vinay Joshi 6 years ago

Dear Vinay Joshi ji, thank you for writing in.

You are correct, we have to read between the lines, and investigate further the silent parts.

At the end of the day, it is my submission that wars are fought and won on the nib of a pen. That is the weapon of choice for now.

A book? Well, shall try - and make it free for reading and without copyright, on the net, when it happens.

Thank you for the encouragement.


Vinay Joshi

In Reply to malq 6 years ago

Dear Mr. VM,

Is 'malq' your pseudonym, irrespective, i wish you write the true expose, and bring it out.

Ms.Sucheta, [Padmashree awardee] will always be of help to you apart from moral boosting & encouragement from person like me.

[I've always noted your comments, on all aspects, BFN, t/c.]



6 years ago

Besides, "Treasure Islands", you can also consider these:

The Complete Guide to Offshore Money Havens,: How to Make Millions, Protect Your Privacy, and Legally Avoid Taxes
Jerome Schneider

Offshore Investments that Safeguard Your Cash: Learn How Savvy Investors Grow and Protect Their Wealth
Erika Nolan , Shannon Crouch

Tax Havens: How Globalization Really Works
Ronen Palan , Richard Murphy , Christian Chavagneux

All the 3 are available in India (Flipkart).



In Reply to sachin 6 years ago

Thank you Sachin, appreciate your inputs, and in return, may I suggest Amitav Ghosh's Ibis trilogy (of which two have come out so far) as well as Julia Lovell's books on China's interacts with the colonial invaders, especially the recent one, The Opium War. In addition, Kirti Chaudhuri'sbookls on the Economies of the Indian Ocean, a bit long, but the historical parts can be read in parts.

Thanks again/malQ

Settlement of insurance policy sold online not any different

“Settlement of claims depends on the terms of policy contract rather than mode of sale. Therefore, claims under policies sold online would be settled in same way as policies sold on other modes so long as the terms of policy contract are the same,” minister of state for finance Namo Narain Meena said

New Delhi: Claims under insurance policies sold online would be settled in the same way as policies sold using conventional method, reports PTI.

In a written reply to the Rajya Sabha, minister of state for finance Namo Narain Meena said as per the information from the Insurance Regulatory and Development Authority (IRDA), some insurance companies resort to sale of insurance products through their websites or portals in addition to sale through the conventional distribution channels.

“Settlement of claims depends on the terms of policy contract rather than mode of sale. Therefore, claims under policies sold online would be settled in same way as policies sold on other modes so long as the terms of policy contract are the same,” Mr Meena said.

He also said that as yet there is no proposal from any insurer for sale of their entire policies on online mode.

“Insurance is sold through multiple modes such as face-to-face, tele-calling and online. So far as online is concerned, it affords a non-intrusive and easy purchase of insurance at a time convenient to the buyer from wherever he is located without the involvement of an intermediary,” he said.

Mr Meena said that as per census 2001 data, the IRDA has reported that the approximate number of insurable persons in the country is 57,03,35,944.

“The IRDA has informed that the details of insured persons, institutions, etc, company-wise are not maintained,” he said, adding that no detail of people belonging to Above the Poverty Line (APL) and Below the Poverty Line (BPL) category are maintained.

As on 31 March 2010, the total number of policies in force relating to private life insurers were 4,03,63,200 and the lives covered under group new business by private life insurers were 4,19,59,796.

According to the minister, insurance penetration has increased from 2.32% to 5.51% over 2000-2010 period.

“The number of insurance offices has increased from 2,199 in 2000 to 12,018 in 2010.

“From the single channel system of tied agents which was predominant before opening up of the sector in 2000, multiple channels of distribution comprising brokers, bancassurance, corporate agents emerged in the decade and accounted for nearly 21% of the new business in the year 2009-10,” Meena said.

He added that these channels have aided in expanding the market as well as in better outreach.

The first year life insurance premium grew from Rs19,857.28 crore in 2001-02 to Rs1,09,894.02 crore in 2009-10.

Meanwhile, the total life insurance premium rose from Rs50,094.46 crore in 2001-02 to Rs2,65,450.37 crore in 2009-10, the minister added.

In reply to another question in Rajya Sabha, the minister said that there have been some concerns in the recent past about high interest rates, coercive recovery processes and multiple lending practiced by some micro finance institutions.

“In order to study these and other related issues and implications for its policies and given the useful role played by the micro finance institutions in providing access to financial services to the poor and excluded, the Reserve Bank set up a sub-committee... study the issues and concerns in this sector, including ways and means of making interest rates charged by them reasonable,” he said.

The sub-committee, headed by RBI director YH Malegam has submitted a report in this regard.

Bank loans to MFIs has been given the status of priority sector. A margin cap of 12% for all MFIs and interest cap on individual loans at 26% per annum for all MFIs have been fixed, besides directing them not to charge any penalty for delayed payment.


Banks can now open branches in Tier 2 cities without RBI nod

The decision was taken as it was observed that branch expansion in Tier 2 centres has not taken place at the desired pace

Mumbai: The Reserve Bank of India (RBI) on Tuesday relaxed branch authorisation policy, allowing banks to open administrative office or service branch in cities with population of over 50,000 but less than 1 lakh without its approval, reports PTI.

“Now that general permission to banks has been extended for opening of branches in Tier 2 centres, domestic scheduled commercial banks (other than RRBs) will be allowed to open administrative offices and central processing centres (CPCs) or service branches in Tier 2 centre (with population 50,000 to 99,999 as per Census 2001),” the RBI said in a notification.

Thus, a bank can open such offices in the Tier II cities without permission from the central bank.

The decision was taken as it was observed that branch expansion in Tier 2 centres has not taken place at the desired pace, it said.

As per the existing regulation, such relaxation is already available to banks in case they want to expand their presence in Tier 3-6 cities.


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