Black money: Switzerland refuses to share information on bank account holders, Delhi mulls strong response
NEW DELHI: The Swiss authorities have told the Indian government they will not be able to share information on bank accounts without the consent of the account-holders. In a letter last month, Switzerland’s finance minister also told her Indian counterpart that the 2011 Double Taxation Avoidance Agreement, under which India had sought information, applies prospectively, thus ruling out access to information about accounts opened before that date, said a senior official familiar with the letter’s content.
The missive from Swiss Finance Minister Eveline Widmer-Schlumpf comes in the wake of an aggressive drive by Indian tax authorities to unearth information on offshore accounts held by Indian citizens. In the recent past, these efforts have focused on the so-called HSBC list — which was passed on to India by the French authorities, who in turn obtained the names from a disgruntled employee of the British bank.
In his budget speech on February 17, Finance Minister P Chidambaram had spoken of “several hurdles” in obtaining evidence from foreign countries about offshore accounts held by Indians.
The letter from the Swiss finance minister said notifying the account-holder of the fact that tax authorities of a foreign country were making enquiries is in line with Swiss bank secrecy laws. If the account-holder declines to part with the information, the Indian government could challenge such non-cooperation in Swiss courts, the official familiar with the communication said.
India is likely to reject this stance of the Swiss authorities and may even declare the Alpine nation a Non-Cooperative Jurisdiction, which would result in suspending tax benefits available under the bilateral tax treaty. “A reply has been sent. We have informed the Swiss government that this (seeking information on bank accounts) is a sovereign request and individuals can’t be notified. And information has to be shared under Article 26 of the treaty signed between the two countries, which overrides Swiss domestic laws,” said the official cited earlier.
“India is also trying to bring pressure on Switzerland through G20. And if even that doesn’t work out, we have the option of invoking Section 94(A) of the Income-Tax Act and declare Switzerland a Non-Cooperative Jurisdiction,” added this official. ET reported in January that the finance minister had written a strongly worded letter to his Swiss counterpart requesting cooperation. The letter from the Swiss finance minister is in response to this missive.
Last year, India had declared Cyprus a Non-Cooperative Jurisdiction and suspended tax benefits available under the bilateral tax treaty signed in 1994. Under bilateral tax agreements, countries have a legal obligation to exchange such information as is necessary, in particular for the prevention of fraud or evasion of taxes.
“Since Cyprus has not been providing the information requested by Indian tax authorities under the exchange of information provisions of the agreement, it has been decided to notify Cyprus as a notified jurisdictional area under Section 94(A) of the Income-Tax Act,” said the official, explaining that the provision could be invoked against Switzerland too. A senior official contrasted the non-cooperation of the Swiss authorities with what he described as their willingness to share information with the US authorities.
“The government has succeeded, through alternative methods and special efforts, in obtaining information in 67 cases and action is underway to determine the tax liability as well as impose penalty. Prosecution for wilful tax evasion has been launched in 17 other cases. More enquiries have been initiated into accounts reportedly held by Indian entities in no-tax or low-tax jurisdictions,” Chidambaram had said in his budget speech.
Credit: Economic Times