India and Switzerland have signed a deal that would allow both to automatically share tax-related data from 2019. The Automatic Exchange of Information (AEOI) will be implemented on January 1, 2018; the first year will involve collection of data in accordance with global standards.
Switzerland is a known safe haven for illicit wealth. However, India's rank in Swiss bank holdings has been falling consistently.
So far, India had to ask Switzerland for specific bits of information by proving that a valid inquiry was on against the account holder. The Swiss could delay or deny the information altogether.
A joint declaration for the implementation of Automatic Exchange of Information (AEOI) was signed last month between the two sides here and it provided that both countries would start collecting data in accordance with the global standards in 2018 and exchange it from 2019 onwards. The AEOI conforms to a norm set by global economic body the Organisation for Economic Co-operation and Development (OECD) for tax transparency.
The automatic exchange of information will discourage Indians from stashing black money in Swiss banks. Indian deposits in Swiss banks have been falling already.
The money held by Indians in Swiss banks stood at a record high of 6.5 billion franc by 2006-end. However, it has been falling since then, except for in 2011 and in 2013 when it had risen by over 12 per cent and 42 per cent, respectively.
Though the deal will do little by way of bringing back black money from Swiss accounts, it will have a deterrent effect. The black money hoarders will be under pressure with one big safe haven gone off their list.
In its war on black money, India has also signed treaties with Mauritius, Singapore and Cyprus to prevent round-tripping of funds.
Switzerland, which has always been at the centre of the debate on black money allegedly stashed by Indians abroad, used to be known for very strong secrecy walls till a few years ago around its banking practices.
A huge global pressure has resulted in Switzerland relenting on the tough secrecy clauses its local laws gave to the banks.
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