Facing a global crackdown including from India on their ‘safe haven’ tag, Swiss banks today asserted that “bank-client confidentiality” will not disappear and ‘automatic information exchange’ is not the only solution to the black money menace.
The assertion comes at a time when Switzerland is in the process of implementing a worldwide ‘automatic exchange of information’ framework for sharing of details about suspected cases of tax evasion with India and many other countries that have joined an OECD convention in this regard.
India is expected to start getting information under this regime from Switzerland, about bank account and other details of Indians, from 2018.
“Bank-client confidentiality will not disappear, but it is undergoing far reaching-changes, particularly in tax-related issues,” according to the Swiss Bankers Association, the apex body of banks based in Switzerland.
Asserting that Swiss banks continue to resolutely implement their strategy of tax compliance, SBA said “criminals” never had any protection under bank-client confidentiality, as banks have always been under obligation to disclose client information about them.
It further said that international standards were taking on an increasingly important role with regard to when a Swiss bank is required to disclose client information to tax authorities.
“These standards are developed by organisations such as the OECD, of which Switzerland is a member. Switzerland is taking part in these developments for the very reason that tax evasion was never legal in our country. Since 2009, administrative assistance in the case of tax evasion has been part of Swiss double-taxation agreements in accordance with the OECD standard.
Further to this, on October 9, 2013, our Government resolved to sign the Council of Europe and OECD’s convention on administrative assistance in tax matters. In addition to the exchange of information which as an international standard in future may also be ‘automatic’ there are other means for the prevention of tax evasion.
“These include: the Swiss withholding tax on income from capital from domestic sources, the agreement with the EU on savings taxation, the flat-rate withholding tax agreements with Great Britain and Austria and the FATCA agreement with the US.”
SBA further said that Switzerland has recently sharpened the sanction for violation of bank-client confidentiality, which now includes cases in which somebody passes ‘stolen’ bank-client data on or sells it to a third party and an amendment to law in this regard “will most likely enter into force this year”.
While the Indian government has proposed a new law to bring to book those stashing illicit assets abroad, it expects automatic exchange of information with Switzerland and other countries to be of big help in its fight against this menace.
In the recent past, India has stepped up its efforts in this regard, including by way of re-negotiating tax treaties with various countries.
Many other countries are also taking steps to address the menace of illicit funds being stashed away in tax havens.