India makes big strides: Pakistan seeks to follow new Swiss law on black money
India has made a major breakthrough with Swiss tax authorities, who have agreed to provide information in respect of cases independently investigated by IT department whereas first round of talks have reportedly taken place between Pakistan and Swiss government on revision of Convention for the Avoidance of Double Taxation agreement.
Analysts said that India has introduced major steps in budget (2015-16) to check generation of black money and its concealment to be dealt with effectively and forcefully. A bill for a comprehensive new law to deal with black money parked abroad would be introduced by Indian legislators. In India, Benami Transactions (Prohibition) Bill, Prevention of Money Laundering Act 2002 and Foreign Exchange Management Act deal with black money.
Key features of new law on black money in India is that evasion of tax in relation to foreign assets would entail a punishment of rigorous imprisonment up to 10 years, be non-compoundable, have a penalty rate of 300 percent and the offender will not be permitted to approach the Settlement Commission. India is proposing that concealment of income/evasion of income in relation to a foreign asset to be made a predicate offence under Prevention of Money Laundering Act.
Pakistani authorities have proposed that the fiscal offences, including serious tax crimes/tax evasion would be brought into the ambit of money-laundering under the proposed amendments to the Anti-Money Laundering Act (AMLA). At present taxation offences are not considered as money laundering offences under the existing law. An enabling provision has been proposed in the Anti-Money Laundering Act to include serious offences of taxation into the money laundering regime. The Finance Minister has committed to the International Monetary Fund to ensure the passage of this legislation by the end of June 2015.
India has given highest priority to the investigation into cases of undisclosed foreign assets in the last nine months of 2014-15. Major breakthrough with Swiss authorities is their agreement to provide information in respect of cases independently investigated by IT department. Swiss government has also agreed to confirm genuineness of bank accounts and provide non-banking information and to provide such information in time-bound manner and to commence talks for automatic exchange of information. The Federal Board of Revenue (FBR) held the first round of negotiations with the Swiss tax authorities to revise the Convention for the Avoidance of Double Taxation vis-à-vis taxes on income and clauses pertaining to exchange of information. Pakistan has taken the first step to re-negotiate and upgrade treaty on Avoidance of Double Taxation with Switzerland to tax undeclared money deposited in Swiss banks by Pakistani nationals.
Both the sides have agreed to revise the whole convention with modifications in clauses pertaining to the exchange of information. The FBR officials discussed the revision of the entire convention with the Swiss tax authorities. During the visit of FBR officials to Switzerland, the Pakistani delegation also took up the issue of access to banking information under the said treaty, they added.
Sources said that the government is seriously working on seeking assistance from the new Swiss law referred to as “‘The Restitution of Illicit Assets Act, 2010” that allows the Swiss government to exchange confidential information with governments whose citizens have ill-gotten monies stashed in Swiss banks. Switzerland enacted a new law in 2011 to make it easier for countries to recover assets stolen by politicians and hidden in its banks. In early 2012, Switzerland said it had returned $1.83 billion in illicitly-placed assets to countries involved in the Arab Spring regime changes, but Pakistan’s current tax agreement does not allow it to take advantage of the law.
