 "Sharing of bank a/c details: India threatens legal action against Switzerland")
In what might lead to a diplomatic row between India and Switzerland, Finance Minister P Chidambaram has sent a strongly-worded communication to his Swiss counterpart, threatening action under domestic laws against that country over its reluctance to share information on 500 Indians who are alleged to have stashed money in HSBC’s Geneva branch.
According to officials, an action under the I-T Act could mean declaring Switzerland a non-cooperative nation — a move similar to what India earlier did with Cyprus. It becomes financially cumbersome for Indians to make transactions with citizens of a nation declared non-cooperative.
“In the event of continued denial of access to vital information, which Switzerland is obliged to provide under the DTAC (Double Taxation Avoidance Convention), India may be constrained to actively consider the options available under our domestic laws,” Chidambaram said in his letter dated March 13 to Swiss Finance Minister Eveline Widmer Schlumpf.
Also, if a sum is received from a person in that country, the onus is on the assessee to satisfactorily explain the source of such money in the hands of such persons, otherwise it is treated as the assessee’s income. Also, no deduction in respect of any payment made to any financial institution in that country is allowed unless the assessee furnishes an authorisation allowing for seeking relevant information from the said financial institution.
India had invoked this provision against Cyprus and relented only after the European nation agreed to exchange information and amend tax treaty with India.
However, officials concede, unlike Cyprus, Switzerland is a big country and there might be difficulties in declaring it non-cooperative. Switzerland’s GDP stood at $360 billion (on purchasing power parity) in 2012, while Cyprus had just over $23 billion.
Chidambaram said Switzerland had not honoured the terms of DTAC between the two nations under which information about Indians with accounts in Swiss banks had been sought by tax authorities.
“Switzerland’s refusal to provide information to India and other countries on the grounds that the source of the information requested is based on ‘stolen data’ means that, in practice, Switzerland still believes in bank secrecy and is, therefore, not in tune with the modern era,” he said in the letter.
When contacted, an official at the Switzerland Embassy in New Delhi refused to comment immediately.
Syed Akbaruddin, the spokesperson for the external affairs ministry, said: “We will definitely not go against the finance ministry. Governnment means one entity.”
India wants Switzerland to provide information on bank accounts held by Indians that were part of an HSBC bank list made available to India by the French government. French authorities had provided a list of over 500 Indian citizens who allegedly held HSBC accounts in Geneva.
The data were called stolen by Swiss authorities because a French employee of HSBC Geneva had obtained the information through unauthorised means before it landed with the French government in 2008-09. India had made its request to Switzerland for details in 562 cases.
Chidambaram’s letter said: “You would appreciate that, such a situation, where there is no effective exchange of information between India and Switzerland despite clear legal obligation of Switzerland under DTAC is a matter of grave concern for India.”
He requested that country to reconsider its move, saying India was seriously concerned that some taxpayers might have parked substantial unaccounted money and assets abroad.
Chidambaram also threatened to raise the issue of non-coopearation by Switzerland at international fora like G-20 and the global forum of the Organisation of Economic Cooperation and Development (OECD).
Akbaruddin confirmed this could be the next step. “We will see when we can take it up.”
The issue has become more important in the country as corruption has been one of the Opposition parties’ biggest election plank against the ruling Congress party. Also, the Supreme Court had on Wednesday pulled up the Centre for its failure in bringing back black money stashed abroad.
END OF TALKS?
* 2008: HSBC employee Herve Falciani leaks tens of thousands of Geneva bank accounts
* 2011: French govt gives that list to India, US, UK, Australia and Canada
* Jan 2012: Information-sharing pact between India and Switzerland comes into effect in Switzerland (three months later in India)
* Later in 2012: India approaches Swiss authorities, seeks information on 562 cases
* Feb 2014: Indian and Swiss officials hold meetings; Swiss authorities inform India the request is closed
* March 13: FM writes to his Swiss counterpart Eveline Widmer Schlumpf
FIRM STANCE
Excerpts of Chidambaram’s letter to his Swiss counterpart
* “You’d appreciate that, such a situation, where there is no effective exchange of information between India and Switzerland despite a clear legal obligation of Switzerland under the DTAC, is a matter of grave concern for India”
* “The Swiss govt had proposed revision of the domestic law for providing information under the tax treaties... which would have enabled Switzerland to provide information to India in the HSBC cases... However, it is learnt the proposed revision did not take place due to strong political opposition in Switzerland”
* “Switzerland's refusal to provide information in serious cases of tax evasion in India is a sensitive matter in India too.”
* “If information continues to be denied to India under DTAC, the Government of India will be constrained to take a position at the global forum that Switzerland still does not comply with the standards of transparency and that the required legal and regulatory framework is still not in place in Switzerland... India may also have to raise the issue at fora such as G-20”
According to officials, an action under the I-T Act could mean declaring Switzerland a non-cooperative nation — a move similar to what India earlier did with Cyprus. It becomes financially cumbersome for Indians to make transactions with citizens of a nation declared non-cooperative.
“In the event of continued denial of access to vital information, which Switzerland is obliged to provide under the DTAC (Double Taxation Avoidance Convention), India may be constrained to actively consider the options available under our domestic laws,” Chidambaram said in his letter dated March 13 to Swiss Finance Minister Eveline Widmer Schlumpf.
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The Section 94A India had inserted in the Income-Tax Act in 2011 empowers it to notify a country non-cooperative (in technical jargon, a notified jurisdictional area), if there is lack of effective exchange of information. If a country is notified as non-cooperative, it affects transactions entered into by assessees in India with citizens of that country. For example, any payment made to a person of that country will attract a withholding tax of 30 per cent.
Also, if a sum is received from a person in that country, the onus is on the assessee to satisfactorily explain the source of such money in the hands of such persons, otherwise it is treated as the assessee’s income. Also, no deduction in respect of any payment made to any financial institution in that country is allowed unless the assessee furnishes an authorisation allowing for seeking relevant information from the said financial institution.
India had invoked this provision against Cyprus and relented only after the European nation agreed to exchange information and amend tax treaty with India.
However, officials concede, unlike Cyprus, Switzerland is a big country and there might be difficulties in declaring it non-cooperative. Switzerland’s GDP stood at $360 billion (on purchasing power parity) in 2012, while Cyprus had just over $23 billion.
Chidambaram said Switzerland had not honoured the terms of DTAC between the two nations under which information about Indians with accounts in Swiss banks had been sought by tax authorities.
“Switzerland’s refusal to provide information to India and other countries on the grounds that the source of the information requested is based on ‘stolen data’ means that, in practice, Switzerland still believes in bank secrecy and is, therefore, not in tune with the modern era,” he said in the letter.
When contacted, an official at the Switzerland Embassy in New Delhi refused to comment immediately.
Syed Akbaruddin, the spokesperson for the external affairs ministry, said: “We will definitely not go against the finance ministry. Governnment means one entity.”
India wants Switzerland to provide information on bank accounts held by Indians that were part of an HSBC bank list made available to India by the French government. French authorities had provided a list of over 500 Indian citizens who allegedly held HSBC accounts in Geneva.
The data were called stolen by Swiss authorities because a French employee of HSBC Geneva had obtained the information through unauthorised means before it landed with the French government in 2008-09. India had made its request to Switzerland for details in 562 cases.
Chidambaram’s letter said: “You would appreciate that, such a situation, where there is no effective exchange of information between India and Switzerland despite clear legal obligation of Switzerland under DTAC is a matter of grave concern for India.”
He requested that country to reconsider its move, saying India was seriously concerned that some taxpayers might have parked substantial unaccounted money and assets abroad.
Chidambaram also threatened to raise the issue of non-coopearation by Switzerland at international fora like G-20 and the global forum of the Organisation of Economic Cooperation and Development (OECD).
Akbaruddin confirmed this could be the next step. “We will see when we can take it up.”
The issue has become more important in the country as corruption has been one of the Opposition parties’ biggest election plank against the ruling Congress party. Also, the Supreme Court had on Wednesday pulled up the Centre for its failure in bringing back black money stashed abroad.
END OF TALKS?
* 2008: HSBC employee Herve Falciani leaks tens of thousands of Geneva bank accounts
* 2011: French govt gives that list to India, US, UK, Australia and Canada
* Jan 2012: Information-sharing pact between India and Switzerland comes into effect in Switzerland (three months later in India)
* Later in 2012: India approaches Swiss authorities, seeks information on 562 cases
* Feb 2014: Indian and Swiss officials hold meetings; Swiss authorities inform India the request is closed
* March 13: FM writes to his Swiss counterpart Eveline Widmer Schlumpf
FIRM STANCE
Excerpts of Chidambaram’s letter to his Swiss counterpart
* “You’d appreciate that, such a situation, where there is no effective exchange of information between India and Switzerland despite a clear legal obligation of Switzerland under the DTAC, is a matter of grave concern for India”
* “The Swiss govt had proposed revision of the domestic law for providing information under the tax treaties... which would have enabled Switzerland to provide information to India in the HSBC cases... However, it is learnt the proposed revision did not take place due to strong political opposition in Switzerland”
* “Switzerland's refusal to provide information in serious cases of tax evasion in India is a sensitive matter in India too.”
* “If information continues to be denied to India under DTAC, the Government of India will be constrained to take a position at the global forum that Switzerland still does not comply with the standards of transparency and that the required legal and regulatory framework is still not in place in Switzerland... India may also have to raise the issue at fora such as G-20”