Come September this year, India will start to get all the information from Swiss authorities about each Indian who deposited money in Swiss banks. On July 10, in a written reply to a question in Lok Sabha, Minister of State in the Ministry of External Affairs has said, “from September 2019, India will receive on automatic basis, the information in respect of financial accounts held by Indian residents in Switzerland. The information received on request or on the automatic basis may include information about persons allegedly involved in corruption.”
It is not that every Indian who deposited money in Swiss banks is a tax evader. But once India gets all the details, it would be easy to find out money trails of possible financial malpractices and misappropriations. But a lot of sustained effort has been taken from the Modi government to finally reach this stage. All the while, perhaps anticipating the end result of the Modi government’s sustained effort to unearth black money, Indian deposits at the Swiss banks itself came down considerably in the last five years. So, Swiss banks have no longer remained safe tax havens and that is a major victory for India.
The below infographic gives you the idea as to how India systematically went after the money stashed away in such banks to finally get all the information about the deposits from its nationals.
The first ever decision of Modi government 1.0 was to form a Special Investigation Team on black money. Since then, it took a series of measures against the black money stashed abroad. The new act on black money enacted in 2015 has prescribed stringent penal consequences in comparison to rules under the Prevention of Money Laundering Act. Also, this law has included the offense of wilful attempt to evade tax.
The Government gave a one-time compliance window of 3 months for providing an opportunity for taxpayers to make declarations of their undisclosed foreign assets before they were subjected to more stringent provisions of the new law. Undisclosed foreign assets worth Rs 4,164 crores from 648 declarants came to light during this drive.
Sustained Effort at Global Level
If the government is finally able to lay its hand on information of all the Indian accounts in Swiss banks, it is because of Automatic Exchange of Information (AEOI). It is a global effort to combat tax evasion in which India has been a leading force in the efforts to forge a multi-lateral regime for proactive sharing of financial information.
India has also been proactively engaging with foreign governments, for exchange of information under Double Taxation Avoidance Agreements, Tax Information Exchange Agreements, Multilateral Convention on Mutual Administrative Assistance in Tax Matters, and South Asian Association for Regional Cooperation (SAARC) Multilateral Agreement.
In 2016, India amended its over two-decade-old tax treaty with Singapore that will allow it to tax capital gains on investments from the South East Asian nation, a significant milestone in plugging round-tripping of funds. Prior to this, it had entered into similar treaties with Mauritius and Cyprus.
India has built its credibility in the global sphere by actively participating in the larger collective efforts in fighting tax evasion. For example, as part of G20, India had participated actively in the Base Erosion and Profit Shifting (BEPS) initiative that deals with MNCs’ tax avoidance strategies that reduce the tax bases for countries.
In fact, Switzerland is sharing all the information only after being satisfied with India’s ability in data protection. As this report in the Financial Express notes,
“in its latest status report on the AEOI implementation, Switzerland’s State Secretariat for International Finance (SIF) said India shared information with 58 partner countries during 2018 and it has “reasonable” confidentiality and data security laws. It found no “well-founded negative feedback” from other countries, individuals or companies to indicate that India has any relevant shortcomings in these laws. The SIF also found India to have a good network of over 100 partner countries with mutual assistance treaties.”
Conclusion- Swiss Banks No Longer a Tax Haven
With the information freely flowing from Swiss banks to India, people can no longer stash their unaccounted money in these banks without the knowledge of the authorities. As far as the money parked already in these banks is concerned, there is a staggering 80% reduction in the overall deposits (all of it can’t be treated as black money) from Indians in Swiss banks as the snapshots from media reports suggest.
Thus, the ‘Swiss money’, a term that had entered into popular discourse, which stood for indicating money earned through dishonest means and stashed away, may be under the threat of going into oblivion.
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