The Economic Times of India reports:
The government is planning to bring in strict laws to check cross-border tax evasion, often achieved through special transactions.
Under the proposed legislation, any transaction carried out primarily to evade tax will be denied the benefits extended by the double taxation avoidance agreement (DTAA); instead, such transactions will be governed under the domestic tax. It will also cover the practice of registering companies in tax havens.
Many developed countries, including the United States and the United Kingdom, have already enacted laws to contain tax evasion through artificial transactions.
According to unofficial estimates, the tax havens hide nearly $12 trillion, a major part of which is due to tax evasion. The tax that could have been generated on hidden funds is estimated a $250-300 billion.
Thanks goodness, and about time. India has suffered massive tax leakage because of its absurd double tax treaty with Mauritius, which the Chamber of Commerce there blatantly promotes as an offshore activity. If India is to plug this loophole that's a good day for its economy.