BERN/NEW DELHI, May 21: Moving closer towards doing away with banking secrecy practices, Switzerland has started ground work for implementation of automatic exchange of information on tax matters.
Switzerland, known for strong banking secrecy rules, had agreed to proposed new standard for automatic exchange of tax information earlier this month.
The draft negotiation, which mandates for introduction of the new global standard on automatic exchange of tax information, was approved by the Swiss Federal Council today.
“The introduction of the automatic exchange of information with foreign countries would be conducted by means of separate bilateral agreements with the partner countries,” the Swiss Government said in a statement.
It noted that existing legislation excludes automatic exchange of information.
Earlier this month, Switzerland, India and 45 other nations had agreed upon automatic exchange of tax information, which is seen as a major step forward in global efforts against banking secrecy practices.
The move also came as a boost for India, which has stepped up efforts to track down alleged illicit funds stashed away by Indians in overseas jurisdictions, including Switzerland.
The endorsement of the ‘Declaration on Automatic Exchange of Information in Tax Matters’ under the aegis of think-tank OECD earlier this month had paved the way for finalising a single global standard in this regard later this year in September.
Paris-based Organisation for Economic Cooperation and Development (OECD) sets the global tax standards and frames conventions against tax frauds, among others.
With regard to implementation of automatic information exchange, the Swiss Government today said that in the initial phase priority would be given to countries with which there are close economic and political ties.
Besides priority would be given to countries that, if appropriate, provide their tax payers with sufficient scope for regularisation and which are considered to be important and promising in terms of their market potential for Switzerland’s finance industry.
According to Switzerland, negotiations on the automatic exchange of information with other selected countries are to be examined.
“There is to be only one global standard, the exchanged information should be used solely for the agreed purpose (principle of specialty), the information should be reciprocal, ie should flow in both directions, data protection must be ensured and the beneficial owners of trusts and other financial constructs should also be identified,” it said.
“In general terms, the introduction of the automatic exchange of information should create a level-playing field and Switzerland’s reputation and that of its financial centre in the area of taxation and thereby overall competitiveness should be improved,” the statement said.
Swiss authorities would collaborate with the financial sector besides carrying out consultations with relevant Parliamentary committees.
“The mandates should be definitively adopted by the Federal Council at the start of autumn. The results of the negotiations and specific legislative proposals will be submitted to Parliament later,” the statement said.
As per OECD, the new standard, expected to be finalised in September this year, provides for exchange of information on bank account balances, interests, dividends, other financial income and sales proceeds to compute possible capital gains.
Against the backdrop of India stepping up pressure for data on alleged illicit funds parked in Swiss banks, Switzerland earlier this month had said it could not positively respond to requests which were beyond the ambit of bilateral tax treaty.
Reiterating that it is committed to fighting tax evasion, Switzerland had also said both nations should respect their national and international legal obligations.
Outgoing Finance Minister P Chidambaram has written at least three letters to his Swiss counterpart Eveline Widmer Schlumpf within four months on the matter of sharing information about alleged illicit funds parked in banks there by Indians.
Separately, the Federal Council today adopted the draft law with regard to freezing and restitution of illicitly acquired assets of foreign politically exposed persons (PEPs).
“The draft law takes over existing legislation and practice and reworks them into a single body of law.
“In parallel to the legislative work, the Federal Council has stepped up its efforts to establish a more efficient framework for international cooperation on the restitution of illicitly acquired assets of PEPs,” Swiss government it said in a separate statement.
Against the backdrop of Arab Spring, the Council had issued several freezing orders against PEPs.
“The draft law comprehensively governs the freezing, confiscation and restitution of illicit assets of PEPs… The draft law provides for the possibility of taking targeted measures to support the country of origin in its efforts to recover illicitly acquired assets,” it said. (PTI)
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