British Virgin Islands data theft stumps Indian tax authorities; offenders could take advantage

MUMBAI: A cat-and-mouse game is about to begin between Indian tax authorities and wealthy individuals who find their names in the public domain for allegedly floating companies in the British Virgin Islands (BVI) to stash away undisclosed wealth.
While these persons have started receiving notices from the Income-Tax Department, seeking explanation on their shareholdings in offshore entities, a recent development has emboldened these individuals.
Portcullis, the Singapore-based service provider that devises clever structures to help rich Asians save tax, has filed a complaint with the Virgin Islands police as well as alerted the Singapore police about a data theft.
Among the 610 Indians whose names are now on the Internet for alleged BVI links, many could take advantage of the development to frustrate the tax department's efforts and even wriggle out of the mess. Till now, it was felt that tax officials were on a stronger ground as the data was an outcome of investigation by a consortium of journalists and the findings were available on the Internet. Compared with previous information like list of Indians with unreported bank accounts in HSBC Switzerland and LGT Bank in Liechtenstein (a tax haven near Germany), the data on firms in BVI, a Caribbean tax haven, was perceived to be far more tenable.
"One can go through the BVI information on the Internet. Indeed, the tax department notice begins with a reference 'as per information in the public domain'," said a person familiar with the development. But following Portcullis' claim that the British Virgin Islands data was stolen, individuals who have come under the glare would dodge the tax office as stolen information carries little legitimacy.
"This is the stance they are taking. Courts are unlikely to accept stolen data and invoking the treaty with BVI too becomes difficult. The treaty has no scope for fishing expedition," said a senior tax professional and an expert on offshore trust matters.
Only specific information about individuals or companies that are under investigation can be shared. While these individuals in the BVI list have come under the I-T probe, the very investigation is based on stolen data... This is where these people are pinning their hopes on," the tax expert said.