India and Switzerland signed an automatic exchange of financial information deal which complements govt’s crackdown on black money. This means that the option of concealing the illegal wealth through Swiss banks is most likely to be closed. This historical move directly complements govt’s demonetization move to target domestic black money.
Recently released notification of Benami Transactions (Prohibition) Act also gives further ammunition to government to crack down on the tax evaders.
Analysts are expecting that these moves will certainly help the economy in longer term in curbing the black money. They are saying that “Even if the measures do not extinguish the problem of black money, they will increase the cost and risks of garnering illegal wealth.”
According to a joint declaration by Indian and Swiss authorities, India will automatically receive all financial information about its residents. This information will include bank accounts and balances, dividends and interest income. It will also include the sales proceeds used to calculate capital gains tax, from September 2019. The information will be for assessment years starting 2018.
Sushil Chandra, chairman, Central Board of Direct Taxes, and Gilles Roduit, deputy chief of mission of the Swiss Embassy in India singed this historical pact. It is worth mentioning that the pact follows several years of negotiations between the two countries.
The agreement will have to be ratified by the Swiss Parliament. So far, Switzerland had signed such bilateral agreements mainly with European Union member countries.
The Automatic exchange of information (AEOI) seeks to bring the era of banking secrecy to an end. Switzerland is a signatory to the AEOI agreement under the aegis of the Organization for Economic Co-operation and Development.
India and Switzerland achieved significant success in talks following a visit by Prime Minister Narendra Modi to Switzerland earlier this year. There he pushed for automatic exchange of information in a meeting with Swiss President Johann Schneider-Ammann.
With this pact in effect, the information coming from Switzerland will be legally sourced and hence there will be no bar on usage of such information to catch tax evaders