New Delhi/Berne: India may have to wait longer for joining "selected" countries with whom Switzerland plans to do automatic exchange of information on tax matters, even as Indian and Swiss officials will meet soon to iron out their bilateral arrangements on suspected tax evasion cases.
Switzerland has started a process for putting in place a mechanism for automatic exchange of tax information with foreign jurisdictions, but in the initial phase, the Alpine nation has decided to focus only on European Union and the US.
"The primary focus is on the European Union (EU) and its member states, as well as the United States. Negotiations on the automatic exchange of information with other selected countries are to be examined," a Swiss Federal Department of Finance spokesperson said from Berne.
The response was to a query on whether India would also be among the countries with which Switzerland would start discussions in the initial phase. The spokesperson further elaborated that initially the focus would be on countries having close economic and political ties with Switzerland, but did not name India.
"In an initial phase, consideration would be given to countries with which there are close economic and political ties and which provide their taxpayers with sufficient scope for regularisation and which are considered to be important and promising in terms of their market potential for Switzerland's financial industry," the official added.
Swiss Federal Council, on October 8, adopted definitive negotiation mandates for introducing the new global standard for the automatic exchange of information in tax matters with other countries. The new Indian government, which assumed office in May, has stated that all efforts would be made to bring back the alleged black money parked by its citizens abroad, including in Swiss banks.
A meeting is likely to take place in "coming weeks" between Indian and Swiss officials in connection with India's efforts to convince Switzerland to share details about suspected tax evaders who might have accounts in Swiss banks. Indian and Swiss authorities have been in talks for quite some time on the matter of alleged black money parked by Indian citizens in banks in Switzerland.
The Swiss Finance Ministry spokesperson recently confirmed that a meeting is expected in the coming weeks, but did not disclose any further details. The new automatic information exchange framework is being put in place close on the heels of G-20 nations, including India, approving a mechanism for such cooperation between different countries and India is one of the early adopters of this framework prepared by Paris-based think tank OECD.
"The effectiveness of AEOI (Automatic Exchange of Information) will come only when the standard is translated into domestic legislations and hardware in banks' IT. This means that AEOI will take place in 2017 at the earliest," Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, had said in May.
During that month, 47 countries, including India and Switzerland, agreed to this automatic exchange mechanism. The new standard provides for exchange of information on bank account balances, interests, dividends, other financial income and sales proceeds to compute possible capital gains.
Latest data from the Swiss National Bank shows that total money held by Indians jumped to Rs Rs 14,100 crore in 2013 as compared to Rs 8,547 crore a year ago. Following amendments to their Double Taxation Avoidance Convention (DTAC) in October 2011, India has made several requests seeking information about its nationals holding bank accounts in Swiss banks.
However, Swiss authorities have been refusing to share information on names procured by India through other countries, namely France and Germany, saying that they figured in lists stolen by certain ex-employees of concerned banks. Switzerland says that bank account details cannot be shared on the basis of illegally obtained information.
In July, Finance Minister Arun Jaitley had informed Parliament that Switzerland has raised some legal issues with regard to providing details of Indian citizens who have parked illegal funds in Swiss banks. Asserting that the government was making all efforts to get details of such accounts, Jaitley had also said it was collecting evidence in this regard.
A Special Investigation Team (SIT), chaired by former Supreme Court judge Justice MB Shah, is looking into the menace of black money. Meanwhile, Swiss government has said that the new international standard on automatic exchange of tax information would allow for a level playing field in the competition between financial centres besides being an important instrument to combat tax evasion.
However, it has maintained that domestic bank client confidentiality would not be affected by the implementation of the new global standard. "There is to be only one global standard, the exchanged information should be used solely for the agreed purpose (principle of speciality), the information should be reciprocal, i.e. should flow in both directions, data protection must be ensured and the beneficial owners of trusts and other financial constructs should also be identified," the Swiss government had said in a statement on October 8.
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