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  1. Fight against black money: Swiss to help on stolen data too

Fight against black money: Swiss to help on stolen data too

In a move that may help India's fight against black money, Switzerland today proposed amending its laws to share information with foreign countries probing tax crimes on the basis of 'stolen data', provided details have come from administrative channels or public sources.

By: | Published: September 2, 2015 7:36 PM

In a move that may help India’s fight against black money, Switzerland today proposed amending its laws to share information with foreign countries probing tax crimes on the basis of ‘stolen data’, provided details have come from administrative channels or public sources.

A bill in this regard was today approved by the Swiss Federal Council, the top-most policy making body of the Switzerland government, and it would be discussed in Parliament after a public consultation process.

The proposal assumes significance for India because it is probing hundreds of its citizens for suspected hoarding of alleged black money in Swiss banks and their names are part of a much longer list of account holders in HSBC’s Geneva branch which was ‘stolen’ by a former bank employee.

The list later found its way to the French government, which shared the relevant names with its Indian counterpart.

As domestic laws in Switzerland do not allow ‘mutual assistance’ to the requests based on stolen data, the Swiss authorities have been refusing to share details with India about these account holders despite a bilateral treaty being in place between the two countries.

However, Switzerland has agreed to share details if India is able to provide ‘independent evidence’ about these persons and through this route Indian tax department has been able to get details in some cases.

The proposed change in the law would make it much easier for India to get the required information about those suspected to have stashed black money in HSBC’s Geneva branch, as the information has been received through its “normal administrative assistance channel” with France.

Announcing its today’s decision, the Federal Council said it has initiated the consultation proceedings on the revision of the Tax Administrative Assistance Act, which provides for an easing of Swiss practices with regard to stolen data.

“It should now be possible to respond to requests if a foreign country has obtained the stolen data via normal administrative assistance channels or from public sources.

“However, administrative assistance is still not possible if a country has actively acquired the stolen data outside of administrative assistance proceedings.

“The proposed legislative amendment will clarify the legal situation while also taking account of international developments,” it said.

The Federal Council had previously also proposed easing administrative assistance practices in the case of stolen data in 2013 with the first revision of the Tax Administrative Assistance Act.

However, the majority of the cantons, parties and business associations rejected the proposal in the consultation on that occasion.

Since then, international practice has established that exceptions to the exchange of information will be tolerated only on a very restricted basis.

Currently, exchange of information can be refused if it is incompatible with public policy, such as in case of requests motivated by racist, political or religious persecution.

Swiss practices were therefore increasingly called into question by numerous countries and the Global Forum on Tax Matters.

The Federal Council said it is therefore now clarifying the legal situation and taking account of international requirements with the proposed legislative amendment.

In addition, Switzerland will find itself in a better position for the next phase of the Global Forum peer review on administrative assistance in tax matters.

The Swiss government said they will continue to reject administrative assistance requests based on stolen data actively acquired by the requesting state outside of administrative assistance proceedings.

At the same time, “it intends to respond to requests in the future that are based on data that has been obtained by the requesting state through normal administrative assistance channels or from public sources and that has not been actively acquired in any other way.

“Nevertheless, the foreign taxpayers concerned will retain their legal right to lodge an appeal against the exchange of bank client data within the framework of administrative assistance,” it added.

The consultation will continue till December 2, 2015 and the bill is due to be discussed in Parliament in summer 2016.

In a recent visit to India, Switzerland’s Economic Affairs Minister Johann N Schneider Ammann had said that the Swiss Parliament will soon consider changes in laws to look into the possibility of sharing information in cases being probed on the basis of stolen data of Swiss bank accounts.

Ammann had said Switzerland is sensitive to the fact that the issue of black money is very important for India and needs to be resolved.

In the meantime, a new black money law has come into force in India, under which those found to be stashing illicit funds in foreign locations, including Swiss banks, would face strict penal action, including up to ten years in jail and a penalty of 90 per cent of funds in addition to 30 per cent tax levy.

A one-time ‘compliance window’ is currently open till next month which allows the persons with foreign assets to come clean by payment of 30 per cent tax and 30 per cent penalty.

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