The news from London this week that the G-20 group of the world's elite economies have agreed to crack down on tax havens is a revelation for those who were looking more at shoring up of governments and banks as the centerpiece of the action.
Though the contours of the crackdown are not yet clear, it is clear to me that in the coming months, there will be pressures on tax haven countries to reform their practices and banks to implement them.
And this effectively means sharing of information and realignment of information systems- and hence an opportunity for information technology. It is not so much the low or zero tax rates in tax haven countries that riles policymakers in other nations so much as the secrecy surrounding it all. Opaque systems in Switzerland, Singapore and other nations have helped tax evasion on a large scale.
India's information technology (IT) companies like Infosys, Wipro and Tata Consultancy Services have thrived on helping Western banks and financial institutions deal with customers but few realize that the regulation side of the business also involves IT. For instance, when the Enron scandal broke out in the US, the Sarbanes-Oxley law of 2002 that required compliance by company managements resulted in some companies like iGATE Global to build a practice around that. iflex solutions, which is now part of the Oracle fold, has been in the forefront of tapping opportunities around global banks trying to conform to the new norms of the Basle-based Bank of International Settlements.
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