|New Swiss formula|
|Friday, 26 August 2011 00:00|
While India waits for its revised Double Taxation Avoidance Agreement (DTAA) to come into effect—the Swiss will inform India, by October 7, as to whether the DTAA will have to be subjected to a national referendum—a new agreement signed on Wednesday by the Swiss and UK governments opens up another avenue for action. The Indo-Swiss DTAA, when it does come into action, however, does not mean the Swiss authorities will give Indian tax authorities an excel sheet with the name of Indian holders in Swiss banks with the amounts they hold in each account. The way it works, however, is that the Indian taxman will have to make a request and then the information will be made available—this means there will be no fishing expedition, the Indian taxman must have some basic details to begin with, and a credible reason for asking for the account details.
The UK-Swiss treaty is a bit different. While the UK government is allowed to make a maximum of 500 requests per year for information on UK residents who have Swiss bank accounts, Swiss banks will levy a withholding tax on the money held by UK nationals and hand this over to the UK government—the details of the bank account holder, however, will remain anonymous. To show their resolve, Swiss banks have guaranteed the UK government a payment of 500 million Swiss francs (R2,900 crore). A similar agreement was signed with Germany some weeks ago, and the guaranteed amount there is 2 billion Swiss francs (R11,600 crore).
The Global Financial Integrity has put the amount stashed abroad by Indians at $462 billion in 2009, and by 2011, yoga-guru Ramdev had fantastically raised this to $8.8 trillion—much of this is believed to be stashed in Swiss banks. Neither figure has looked particularly realistic, given the high returns Indian stock markets provide, the large amounts coming back to India through Mauritius, and the dramatically lowered taxation levels in India. Indeed, the Swiss banks have gone on record to say they have $2.5 billion of monies held by Indians. Till such time that the government is able to get details of Indian monies held in Swiss banks, it may be a good idea to work on a UK-type deal and start collecting taxes on these funds at least.