Switzerland may share bank data to track black money
A host of countries, including Switzerland and Singapore, have committed to share all financial information with other governments
New Delhi: India moved a step closer to gain access to bank account information of its citizens in offshore banks after a host of countries, including Switzerland and Singapore, committed to share all financial information with other governments.
Not only will it help track unaccounted money it will also discourage tax evasion across borders.
Ending the practice of banking secrecy, eventually all financial information will be shared between governments, including taxpayers’ bank balance, dividends, interest income and sales proceeds used to calculate capital gains tax, under the pledge signed by a total 47 countries, the Organisation for Economic Co-operation and Development (OECD) said on Tuesday.
To be sure, the effectiveness of the agreement will depend on how the respective national governments, especially Switzerland, modifies domestic laws to facilitate the exchange of information, say analysts.
“It will depend on how the Swiss government amends its domestic laws and the safeguards and procedures they insist have to be followed,” said Rahul Garg, leader of direct tax practice at PricewaterhouseCoopers, a consulting firm. “It will also determine whether they agree to exchange information retrospectively or prospectively.”
Switzerland has faced pressure from the US and India for sticking to its encompassing rules on banking secrecy.
The finance ministers of India and Switzerland have exchanged a series of letters in the past couple of months over the European nation’s reluctance to share information from the so-called HSBC list. India wants Switzerland to provide information on bank accounts held by Indians that were part of anHSBC Holdings Plc list made available to India by the French government. France last year provided a list of 700 Indian citizens who allegedly hold HSBC accounts in Geneva.
Switzerland characterises this information as stolen data and says it is not required to share this information with India under Section 26 of the double taxation avoidance convention between the two countries.
“An international agreement will be more effective in pushing countries like Switzerland and Singapore in sharing bank data with countries,” Sunil Jain, a tax partner at J. Sagar Associates, a law firm said. “This should help india in accessing bank account information of its citizens from these countries.”
The OECD will deliver a detailed commentary on the new standard, as well as technical solutions to implement the information exchanges, during a meeting of G20 finance ministers in September, the organization said in a statement.
“Tax fraud and tax evasion are not victimless crimes. They deprive governments of revenues needed to restore growth and jeopardize citizens’ trust in the fairness and integrity of the tax system,” OECD secretary-general José Angel Gurría said in a statement. “Today’s commitment by so many countries to implement the new global standard, and to do so quickly, is another major step towards ensuring that tax cheats have nowhere left to hide.”
According to OECD’s common reporting standards that form the basis of automatic exchange of information, the countries will have to exchange information in relation to both new and pre-existing accounts. But it remains to be seen on how this will be enforced.
Last month, after being rapped by the Supreme Court for its inaction to bring back black money into the country, the government was forced to reveal the names of 18 people who had allegedly stashed black money with LGT bank in Liechtenstein and against whom prosecution has been launched by the income tax department. The government had got this information from German tax authorities in March 2009 under the Indo-Germany Double Taxation Avoidance Convention.
Coincidentally, black money has become a major poll plank in the ongoing elections with the opposition accusing the Congress party-led United Progressive Alliance of not doing enough to bring back black money into the country and take to task tax evaders.
News agency PTI reported on Wednesday that more than 100 entities are under the scanner of the income tax department to detect possible re-routing of black money. The entities under watch include individuals named in the list of more than 700 Swiss bank account holders, and bankers and associates related to certain banks whose Switzerland-based branches are under scanner, it said. It added that 10-15 listed Indian companies, including a few blue-chip names, are also being monitored for any suspected market manipulations.