Switzerland amended Federal Act on International Administrative Assistance in Tax Matters and made key changes in its local laws on information exchange with foreign countries. The amendment will assist foreign countries including India in their pursuit of black money allegedly stashed in Swiss Banks. The revised Federal Act on International Administrative Assistance in Tax Matters entered into force on 1 August 2014.
These amendments came into force from August 2014. The laws were amended under pressure from India and other countries.
Effects of the amendments
• For information about suspected black money hoarders, India and other countries to make group requests
• The Swiss authorities would not provide any prior information to suspected individuals or entities before sharing their details
But, the requesting nation including India will have to establish that any prior intimation to the account holders before information exchange doesn’t takes place as it would defeat the purpose of the administrative assistance and the success of investigation would be thwarted.
About 10 clauses of Federal Act on International Administrative Assistance in Tax Matters has been incorporated by the amendment to lower guard on its famed banking secrecy walls to improve its information-exchange framework. But it also decided to retain certain clauses of the Act that says that the concerned person would get a prior intimation of any such international assistance and thus, the person will be given an opportunity to appeal the decision and inspect the files before being transmitted to the requesting nation. This law could be a major roadblock to effective and timely exchange of information with foreign authorities about suspected illicit account holders.
As per the new Gazette Notification, one of these amendments says that if the foreign authority demonstrates grounds for secrecy regarding certain case documents then the Federal Tax Administration (FTA) may refuse to allow a person entitled to appeal to inspect the corresponding files.
The Swiss authorities would not consider requests as per the new Act are
• If in case that constitutes a fishing expedition
• If it violates the principle of good faith
• If it is based on information obtained through a criminal offence under Swiss law
Hence, these provisions would spoil India’s attempts to seek information on the so-called HSBC list that has been alleged that Indian and other foreign authorities have been provided by a former bank employee, who stole the data about the customers.
The decision to relax the key legislation was taken by the Swiss Federal Council in June 2014 after an intense pressure from India and other countries who are probing the cases of suspected tax crimes. This decision was made as a follow up action of Swiss Parliament that in March 2014 approved revision of the Act, while the referendum deadline for the proposed amendments expired on 10 July 2014.
How Amendment is beneficial for India
Earlier, Switzerland had prepared a list of Indians who are suspects of having stashed black money in Swiss banks and the process of sharing the details were started with Indian government on a spontaneous basis. But the identity of the individuals and entities were not revealed along with the amount of money stashed in banks. This was not shared due to confidentiality clause of the information exchange treaty between the two countries.
India is among the 36 countries of the world that has signed treaties with Switzerland to provide administrative assistance in tax matters in accordance with international standards.
What: amended by Switzerland