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Swiss FTA submits first set of data on Indian account holders – (Switzerland unveils Indian accounts)

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In News: (Switzerland unveils Indian accounts)

  • India has got the first set of Swiss bank account details of its nationals under a new Automatic Exchange Of Information pact (AEOI) with Switzerland.
Switzerland unveils Indian accounts
Switzerland unveils Indian accounts

News Summary:

  • Over a year after signing the AEOI, India has received the first set of data about the account details of its nationals in Swiss banks from the Switzerland’s Federal Tax Administration (FTA).
  • The details relate mostly to businessmen, including non-resident Indians now settled in several South-East Asian countries as well as in the US, the UK and even some African and South American countries.

Impact:

  • The step will help to uncover such hidden wealth of Indians in Swiss bank accounts, for so long governed by strict local rules of secrecy.
  • It will enable governments to discover formerly undetected tax evasion and recover tax revenue lost to non-compliant taxpayers.
  • It will further strengthen international efforts to increase transparency, cooperation, and accountability among financial institutions and tax administrations.
  • Additionally, AEOI will generate secondary benefits by increasing voluntary disclosures of concealed assets and by encouraging taxpayers to report all relevant information.
  • However, the impact on older accounts may be minimal as many Indians might have closed their accounts after a global crackdown on black money led to Switzerland buckling under international pressure to open its banking sector for scrutiny.

Background of the agreement between India and Switzerland:

  • The Indian tax department had detected suspected black money running into thousands of crores of rupees, post investigations on global leaks about Indians stashing funds abroad.
  • In 2016, Switzerland and India had signed a joint declaration on the introduction of the automatic exchange of information (AEOI) in tax matters on a reciprocal basis.
  • Switzerland agreed to AEOI with India after a long process, including review of necessary legal framework in India on data protection and confidentiality.
  • Both countries had planned to start collecting data in accordance with the global AEOI standard in 2018 and to exchange it from 2019

Details of the agreement:

  • The AEOI relates to accounts that are officially in the name of Indians, and they might include those used for business and other genuine purposes.
  • Identification, account and financial information, including name, address, state of residence and tax identification number (TIN) will be exchanged.
  • Further, information concerning the reporting financial institution, account balance and capital income will also be covered.
  • The use and disclosure of the information received is governed by the confidentiality provisions of the India-Switzerland tax treaty.

About: Automatic Exchange of Information (AEOI)

  • The Standard for Automatic Exchange of Financial Account Information in Tax Matters was developed by the OECD (Organisation for Economic Co-operation and Development) and G20 with inputs from other jurisdictions and the financial industry.
  • The Standard requires financial institutions to report information on accounts held by non-resident individuals and entities (including trusts and foundations) to their tax administration.
  • The tax administration then securely transmits the information to the account holders’ countries of residence on an annual basis.
  • Details:
    • The Standard requires not only deposit-taking banks to report, but also custodial institutions, certain investment entities, and certain insurance companies.
    • The type of account information to be reported includes account balances, interest, dividends, and sale and redemption proceeds from financial assets.
    • To ensure completion and accuracy, the Standard also specifies the information gathering procedures to be followed. These procedures draw on the existing international anti-money laundering standards.

Also Read: Governance Concerns: Modi skips NAM summit

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