India's Financial Secrecy: Real Estate, Trusts, and Partnerships Under the Microscope

The latest Financial Secrecy Index (FSI) released by the Tax Justice Network on June 3, 2023, ranks India 24th globally, marking an eight-place jump from its previous position. The country's overall secrecy score remains at 56 out of 100, reflecting a mixed bag of transparency and opacity in various financial sectors.

The FSI evaluates countries based on how permissive their laws are for hiding finances and the financial services they offer to non-residents. These two factors combine to form the 'FSI Value,' which measures a country's contribution to global financial secrecy.

Key highlights of India's secrecy indicators include:

- Banking secrecy (34): This score indicates moderate transparency in banking practices. - Beneficial ownership of trusts (100): This high score suggests a significant lack of transparency, allowing trusts to conceal the identities of true owners. - Beneficial ownership of foundations and companies (0): This score reflects strong transparency measures, requiring the disclosure of beneficial owners. - Free ports ownership (100): This indicates a high level of opacity in the ownership of assets stored in free ports. - Real estate ownership (100): This score points to a high level of secrecy in real estate ownership records. - Transparency of partnerships with limited liability (100): This reflects a lack of transparency in the ownership and financial reporting of such partnerships. - Transparency of company ownership and accounts (100): This suggests that company ownership and financial statements are not transparent. - Public country-by-country reporting (100): This implies that multinational corporations (MNCs) are not required to report financial data on a country-by-country basis publicly. - Legal entity identifier (50): This score indicates partial implementation of unique identifiers for legal entities to enhance transparency. - Tax compliance focus (65): This reflects moderate efforts in targeting tax compliance, especially among high-risk entities. - Foreign investment income (70): This suggests that foreign investment income may not be fully taxed or reported, leading to potential tax base erosion. - Public statistics (10): This indicates limited availability of public data on financial and economic activities. - Anti-money laundering (16): This score suggests weaknesses in anti-money laundering frameworks. - Automatic exchange of information (AEOI; 26): This reflects limited participation in international agreements for the same. - Exchange of information upon request (0): This indicates non-participation or ineffective implementation of information exchange upon request. - International legal cooperation (16): This score indicates limited engagement in international legal cooperation on financial matters.

India has made significant strides in building a strong legal and administrative framework for information exchange, particularly excelling in bilateral Exchange of Information on Request (EOIR) and being an early adopter of AEOI. However, in the 2025 FSI, India scored a low 26/100 on AEOI, raising concerns about:

- Limited coverage of asset types, such as cryptocurrency and digital platforms. - Delays in updating commitments to newer agreements like the Crypto-Asset Reporting Framework (CARF) and platform reporting rules (DPI MCAA).

Despite progress in corporate ownership transparency and public financial reporting, India's efforts are undermined by opacity in other high-risk areas. The country's limited participation in automatic information exchange and low compliance with international anti-money laundering and legal cooperation standards further highlight systemic weaknesses.

The index underscores that financial secrecy is no longer a fringe issue but is driven by some of the world's largest and most influential economies. This should concern anyone who values global fairness. Financial secrecy erodes trust in institutions and weakens the social contract, making citizens question why they should pay taxes when billionaires and MNCs do not. When governments cannot collect taxes, they cannot fund essential services, leading to a decline in trust and stability.

The index also highlights a troubling trend: despite their pro-transparency stance, over half of EU countries are reportedly exploiting a loophole to block tax cooperation with many non-EU, often lower-income, nations. This loophole, stemming from the OECD's tax convention, allows countries to deny assistance or automatic data exchange with jurisdictions deemed 'non-reciprocal' or 'technically unprepared.' In practice, this means that developing countries' tax authorities, those most in need of cooperation to combat illicit financial flows, are denied critical assistance. Meanwhile, wealth siphoned from their economies finds refuge in EU financial institutions, deepening global financial inequality and stifling economic development.

This year's index offers not just a diagnosis but also hope. Countries like Spain, Denmark, and Britain have demonstrated that it is possible to improve transparency while remaining competitive in international finance. Their secrecy scores have decreased, their share of clean financial services has increased, and their rankings have fallen (a positive outcome in this index). In other words, transparency is not economic suicide; it is good governance.

If the EU wants to be taken seriously, it must close its backdoor and begin treating transparency as a democratic obligation, not a geopolitical privilege. Taxation is not merely about revenue; it is about fairness. In a world where wealth moves globally but justice remains local, failing to act now could lead to a far steeper cost—not in euros or dollars, but in trust, stability, and democratic legitimacy.