Modi's fight against black money gets a fillip

India has got the second set of Swiss bank account details of its nationals and entities under the automatic exchange of information pact with Switzerland, marking a key milestone in the government's fight against black money allegedly stashed abroad.

India is among the 86 countries with which Switzerland's Federal Tax Administration (FTA) has exchanged information on financial accounts within the framework of global standards on AEOI this year.

India had received the first set of details from Switzerland in September 2019 under AEOI (Automatic Exchange of Information), when it involved 75 countries.

The information exchange this year involved nearly 3.1 million (31 lakh) financial accounts, FTA said in a statement on Friday.

The number of such accounts was similar in 2019.

While the statement did not explicitly name India among the 86 countries, officials told PTI that India is among the prominent countries with which Switzerland has shared details about financial accounts of clients of Swiss banks and various other financial institutions.

The officials further said a "sizeable number" relates to Indian citizens and entities in the overall exchange of information about over three million financial accounts by Switzerland this year with 86 countries.

Besides, Swiss authorities have already shared information about more than 100 Indian citizens and entities in the past one year on receipt of requests for administrative assistance in cases involving probes into financial wrongdoings including tax evasion, the officials added.

These cases mostly relate to older accounts that might have been closed before 2018, for which Switzerland has shared details with India under an earlier framework of mutual administrative assistance as Indian authorities had provided prima facie evidence of tax-related wrongdoing by those account holders.

AEOI is applicable only to accounts that are active or were closed during 2018.

Some of these cases relate to entities set up by Indians in various overseas jurisdictions like Panama, British Virgin Islands and Cayman Islands, while the individuals include mostly businessmen and a few politicians and erstwhile royals as well as their family members.

The officials, however, refused to share details about the exact number of accounts or the quantum of assets held in the accounts held by Indians, for which the information has been shared with India, citing strict confidentiality clauses governing the exchange framework.

The information shared by Swiss authorities include identification, account and financial information, such as name, address, country of residence and tax identification number, as well as information concerning the reporting financial institution, account balance and capital income.

The exchanged information will allow tax authorities to verify whether taxpayers have correctly declared their financial accounts in their tax returns.

The next exchange would take place in September 2021.

In its statement, FTA said the 86 countries covered under the AEOI this year include 11 new jurisdictions -- Anguilla, Aruba, Bahamas, Bahrain, Grenada, Israel, Kuwait, Marshall Islands, Nauru, Panama and the United Arab Emirates -- in addition to the existing list of 75 countries, with whom information was shared last year.

Further, FTA said the exchange of information this year has been reciprocal with 66 countries.

In the case of 20 countries, Switzerland received information but did not provide any, either because those countries do not yet meet the international requirements on confidentiality and data security (9 countries) or because they chose not to receive data (11 countries).

A total of 38 countries will supply their data to Switzerland in accordance with the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) by December 31, 2020.

These countries have claimed technical difficulties due to the COVID-19 crisis.

Switzerland's first such exchange took place at the end of September 2018 and involved 36 countries, but India did not figure in the list at that time.

Currently, around 8,500 reporting financial institutions (banks, trusts, insurers, etc) are registered with FTA.

These institutions collected the data and transferred it to FTA.

The count has increased from about 7,500 last year.

FTA sent information on around 3.1 million financial accounts to the partner states and received information on around 815,000 financial accounts from them.

FTA also said it cannot provide any information on the amount of financial assets.

Switzerland has committed itself to adopting the global standard for the international automatic exchange of information in tax matters.

The legal basis for the implementation of AEOI in Switzerland came into force on January 1, 2017.

This is the second time that India has received details from Swiss authorities under AEOI framework, which provides for the exchange of information on financial accounts, currently active as well as those accounts that were closed during 2018, the year in which the framework agreement became effective.

However, AEOI only relates to accounts that are officially in the name of Indians and they might include those used for business and other genuine purposes.

The Global Forum of the Organisation for Economic Cooperation and Development reviews AEOI implementation.

According to experts, the data received by India can be quite useful for establishing a strong prosecution case against those who have any unaccounted wealth, as it provides entire details of deposits and transfers as well as of all earnings, including through investments in securities and other assets.

On condition of anonymity, several officials said 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.

A Swiss delegation was in India in August last year before the first set of details could get shared and the two sides also discussed possible steps to expedite the execution of tax information-sharing requests made by India in specific cases.

It is feared 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 to clear the long-held perception of Swiss banks being safe haven for undisclosed funds.

Switzerland agreed to AEOI with India after a long process, including a review of the necessary legal framework in India on data protection and confidentiality.

Photograph: Pilar Olivares/Reuters