India-Switzerland ink agreement automatic sharing of tax-related information

India has signed agreement with Switzerland for automatic sharing of tax-related information from January 1, 2018 with an aim to combat black money.
Prior to it, India had to ask Switzerland for specific bits of information against the Indian account holder in Swiss banks. But due to its earlier secretive laws it could delay or deny information altogether.

Background

Switzerland always has been at centre of debate on black money allegedly stashed by Indians abroad. It is infamously known for very strong secrecy walls around its banking practices till few years ago. In recent past, huge global pressure has resulted in Switzerland relenting on tough secrecy clauses its local laws gave to banks.
The signing of agreement comes after completion of parliamentary procedure in Switzerland for changing domestic secretive banking laws and signing of mutual agreement between India and Switzerland. Both countries in November 2017 had signed a joint declaration for the implementation of Automatic Exchange of Information (AEOI). It provided that both countries will start collecting data in accordance with global standards in 2018 and exchange it from 2019 onwards. The AEOI conforms to norm set by Organisation for Economic Co-operation and Development (OECD) for tax transparency.

Significance

Under the automatic information exchange framework, confidentiality and data protection requirements is to be strictly followed. This process will ensure that signatory always maintains control over its exchange partners and treatment of data exchanged as per OECD norms. The automatic exchange of information will discourage Indians from stashing black money in Swiss banks.

Month: Current Affairs - December, 2017