Home >politics >policy >Tax evasion: India, Switzerland information sharing pact by December

India and Switzerland on Wednesday took an important step towards combating tax evasion with both countries deciding to conclude a pact for automatic exchange of information (AEOI) by the end of the year.

Once the agreement is signed, it will enable India to receive all financial information about its residents, including bank accounts and balances, dividends and interest income and sales proceeds used to calculate capital gains tax from Switzerland from 2018.

A joint statement issued after talks between Swiss secretary of state Jacques de Watteville and revenue secretary Hasmukh Adhia in New Delhi said that officials of both sides will meet before mid-September 2016 to “further discuss the modalities for the reciprocal bilateral implementation of AEOI between India and Switzerland with the view to reaching an agreement at the earliest, possibly by the end of the year."

The progress in talks follows a visit by Prime Minister Narendra Modi to Switzerland earlier this month where he pushed for automatic exchange of information in a meeting with the Swiss President Johann Schneider-Ammann.

Automatic exchange of information seeks to bring the era of banking secrecy to an end where eventually all financial information will be shared between governments. Switzerland is a signatory to the automatic exchange of information agreement under the aegis of the Organisation for Economic Co-operation and Development, or OECD.

However, for the agreement to come into effect, Switzerland has to either sign bilateral agreements with countries or be a signatory to the multilateral agreement. These agreements then have to be ratified by the Swiss Parliament. So far, Switzerland has signed such bilateral agreements mainly with European Union member countries.

India and Switzerland also agreed to a quick resolution of pending disputes between both the sides. To this effect, a team of Indian tax officials will visit Switzerland for talks on pending exchange of information requests.

India also raised the issue of stolen data insisting that Switzerland should share information in all cases as per its treaty obligations. India also welcomed a proposal floated by the Swiss government to cooperate on requests based on data obtained in breach of law that is awaiting the Swiss Parliament’s nod.

“A timely revision of the Swiss law in respect of stolen data would take the Indo-Swiss tax cooperation to a new level," the statement said.

India and Switzerland have been in talks for a few years over information on bank accounts held by Indians that were part of an HSBC Holdings Plc list made available to India by the French government.

Switzerland characterizes this information as stolen data and initially refused to share any data related to this list. Later, it agreed to share information in those cases where investigations have been carried out independently by the Indian authorities.

“India has a very good due diligence process ensuring that all financial institutions report data as per specified standards. If that sort of due diligence is reciprocated by Switzerland and its financial institutions, then it is good news. But one will have to wait and watch till 2018 to see how the information is shared," said Neeti Biyani, consultant at Centre for Budget and Governance Accountability.

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