Shady trade deals back in focus

New Delhi, April 5: The Panama Papers have swivelled the spotlight back on the curious case of some tax havens suddenly turning into significant trade partners of India at at the turn of this decade.

About four-and-a-half years ago, tax sleuths of the directorate of revenue intelligence and the Enforcement Directorate were asked to probe the export and import transactions routed through Bahamas, Panama, British Virgin Islands and Liechtenstein, following a sudden surge in trade, in some cases 1,000 per cent, with these places.

Officials said many of these probes were frustrating exercises as most of these tax havens had stonewalled attempts to get any information.

However, the list exposed by German newspaper Süddeutsche Zeitung yesterday, which contains the names of hundreds of Indians, including industrialists and celebrities, will now be used to see which of these dealings can be tied up with the secret probes.

"We will now check which of these tie up with the older investigations that we have on our records," the officials said.

The finance ministry under Pranab Mukherjee had ordered the probe into the trade deals when some startling data were made available to the government.

In the case of Bahamas, it was seen that exports had surged from just $2 million in 2008-09 to over $2 billion in 2010-11 - an increase of 1,000 per cent in shipments to a country with just 400,000 people, about 20 per cent less than the population of Siliguri in North Bengal.

Payments were often made via a string of shell companies in various places even as the actual shipments went to or came from some other place.

In the case of coal imported from South Africa or Indonesia, the payment could be routed through tax havens in Dubai, Singapore or the British Virgin Islands.

The payment shown on paper could be 50-60 per cent higher than the actual CIF (cost, insurance and freight) value of the shipment.

Importers would claim that the spot prices had shot up for that day or the coal was of a higher calorific value. The actual price could vary between $30 per tonne and $40 per tonne, but the price shown as paid through the various layers of companies in tax havens could be anything between $70 and $80 per tonne.

Enforcement Directorate officials said while the actual value was paid to the company in South Africa that shipped the coal, the "extras" were paid to the intermediary firms in tax havens.

UNDER SCRUTINY

♦ Sudden spurt in trade with tax havens

Reasons

♦ Import from third country routed through tax haven
♦ Payment usually higher than actual value
♦ Excess sum stashed in tax havens
♦ Reverse deals done in exports