Banking secrecy, tax havens undermining global financial stability: Mukherjee

Tax havens and low-tax jurisdictions have been imported factors in the global financial crisis and need to be pulled down if developing countries are to protect their revenue streams, finance minister Pranab Mukherjee said today.

"The opaque system in these jurisdictions and restrictions on exchange of information in these tax havens and their non-compliant behavior is a matter of serious concern," the minister said.

Addressing a seminar on `Adopting tax system and international tax rules to the new global environment: A shared challenge for India and OECD," jointly organised by India and OECD, Mukherjee said the concerns are not only on account of protecting revenue base but also linked to financing of activities which are detrimental to national security interest.

The era of banking secrecy is over, Mukherjee said, adding, the spirit of the statement has to be respected even though "we cannot say with certainty that the bank secrecy is over in all cases."

He said the world must follow up the statement of G 20 leaders in London issued in April 2009, calling for action against non-cooperative jurisdictions, including tax havens. "India," Mukherjee said, "stood ready to deploy sanctions to protect our public finances and financial systems."

He said while the countries in general have accepted to end bank secrecy, some countries have agreed to do so only from prospective date and are not willing to exchange past banking information. "This," he said, "puts a question mark on the efficacy of present legal provisions for exchange of banking information."