Switzerland warns it can suspend black money info exchange
Following India's agreement on automatic exchange of information from next year about suspected black money hoarders in Swiss banks, Switzerland said it can suspend such exchange if confidentiality is not maintained. Further, the Swiss agency, mandated to defend the interests of Switzerland on international financial matters, said steps will be taken to ensure exchanged data doesn't get misused.
As India and other countries await an automatic exchange of information from next year about suspected black money hoarders in Swiss banks, Switzerland has said it can suspend such sharing of details at any time if confidentiality is not maintained. As part of an international commitment to fight the black money menace, Switzerland has effected the automatic exchange of information standard since January 1, 2017. The sharing of details under this framework will begin from next year with the first batch of countries, including India. "Domestic financial institutions are collecting this data for the first time this year, and the Swiss tax authorities will exchange it with their counterparts in partner states in 2018," said the State Secretariat for International Financial Matters (SIF). The Swiss agency is mandated to defend the interests of Switzerland on international financial and tax matters and participates in international negotiations. It said in its latest quarterly newsletter that necessary steps will be in place to ensure the exchanged data do not fall into the wrong hands or get misused. "Switzerland is prepared in principle to introduce the automatic exchange of information with all states and territories which meet the relevant requirements. In this sense, the confidentiality and security of the data are important elements of this international standard," it said. "Switzerland implements the automatic reciprocal exchange of information only with countries which can guarantee confidentiality and data protection. Before any exchanges occur, the Global Forum on Transparency and Exchange of Information for Tax Purposes carries out a thorough examination as to whether or not the partner states which have undertaken to introduce the automatic exchange of information comply with the requirements." "In some important cases, Switzerland additionally gets an on-the-spot impression of the situation in the partner states. Given that Switzerland does not belong to the group of countries which implemented the standard early on (so-called early adopters), it is also benefiting from the experience of other countries," the SIF said. "Before the first exchange occurs, it will be able to examine if all significant elements of the standard have been met. Should it subsequently transpire that a country has not fulfilled its obligations, Switzerland can at any time suspend the automatic exchange of information with the country concerned," it added.SYSTEM IN PLACE 'RELATIVELY SIMPLE' The Swiss agency further said the system in place so far has been "relatively simple", wherein whenever a foreign tax authority was interested in obtaining information located in Switzerland, it had to make a request for administrative assistance. "However, the rapid international developments in recent years have provided Switzerland with two new forms of exchange of information in the area of taxes: spontaneous and automatic exchange of information (AEOI)," it added. In the case of the AEOI, countries mutually exchange information automatically on financial accounts and the details in this case are determined as the standards drawn up by the OECD. The information in spontaneous exchange needs to be exchanged if the transmitting country suspects that the information available might be of interest to another country. While spontaneous exchange has nothing to do with voluntary in this context -- it only means that no preliminary request has been submitted -- this framework was being handled very differently from country to country up to now, the SIF said. "Within the scope of the OECD and G20 project to combat base erosion and profit shifting (BEPS), the spontaneous exchange of information was specified for the first time in the area of advance tax rulings, where there is a risk of base erosion or profit shifting." "The Federal Council adopted the current international standard in this area in the context of a revision of the Tax Administrative Assistance Ordinance. Switzerland will spontaneously exchange information on advance tax rulings for the first time next year," it added. 'NUMBER OF DOMESTIC SWISS BANK BRANCHES HAS HALVED' The agency further said that over the past 30 years, the number of domestic bank branches in Switzerland has almost halved. "A reduction in the number of banking institutions and their branches can be the result of mergers, acquisitions and bankruptcies. A number of policy measures have been put in place by Swiss authorities in recent years to address concerns of its banks providing high secrecy walls around their global clients. New rules make it much easier for several foreign jurisdictions, including India, to get details from Switzerland about people suspected to be involved in tax evasion and other financial crimes. Switzerland has also been issuing notices to several resident Indians and even Indians settled abroad after the receipt of request from India for "administrative assistance", including information about their Swiss bank account details. As per the local law, Switzerland gives an opportunity to the entity concerned to challenge the sharing of information, before providing the assistance to the requesting nation. While India and Switzerland late last year signed a new pact for automatic exchange of information about account details 2018 onwards, the pending requests have been made under their existing bilateral tax treaty. The pace of seeking such details seems to have quickened in recent months, going by the sudden spurt in the number of Indian names figuring in such notifications. ALSO READ | Switzerland to share info on Indians holding Swiss bank accounts