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Friday, September 9, 2011

Swiss open to taxing Indian deposits

New Delhi: The lure of Swiss bank deposits for Indians wanting to keep their unaccounted money away from the taxman’s glare could end as the Swiss government is ready to discuss a formula with India to tax such funds.

Switzerland recently agreed to tax the money held by British and German citizens in Swiss banks and the idea is to replicate the model for India too.

Responding to queries sent by FE, the Swiss Federal Department of Finance, the counterpart of India’s Union finance ministry, said: “Switzerland is open to explaining the Swiss model of a final withholding tax to other interested countries (including India).” It, however, said that any decision on concrete negotiations could only be done after it finalised the agreements with the UK and Germany.

As per the arrangement that Switzerland and UK are about to agree on, UK citizens will have to make one-off tax payments or else the Swiss authority would disclose their account details in Swiss banks. This would be a retrospective tax. Future investment income and capital gains of British clients in Switzerland will be subject to a “final withholding tax”, and the proceeds of this will be transferred to the British authorities by Switzerland. The tax rate has been set between 27% and 48% depending on the category of capital income.

India is currently renegotiating the tax treaty with Switzerland to enable sharing of banking and tax-related information. If the two agree, a separate model could also be worked out for taxing money deposited in Swiss banks. Hundreds of billions dollars are believed to be stashed in Swiss banks by Indian nationals.

Asked how would they react to the Swiss offer, government sources here preferred to remain non-committal, but there were takers for the Swiss move among senior political leaders.

Former finance minister Yashwant Sinha said: “The international opinion on tax havens has changed completely in the recent past. We should carefully study what the Swiss government is doing with other countries (on the question of taxation of unaccounted money in Swiss banks) and put pressure on them for a similar arrangement. They are bound to respond.”

Almost echoing Sinha’s view, former union minister and Shiv Sena leader Suresh Prabhu said: “There is a flight of capital and loss of revenue due to the flow of black money overseas. The government should explore all options to bring black money back to India, including signing of such agreements (like the Swiss-UK pact) that taxes illicit money.”

According to Swiss National Bank data, the total “liabilities” of Swiss banks towards Indians were about Rs 9,295 crore as on December 31, 2010. Independent estimates including one by a BJP task force in 2009 and another by Global Financial Integrity had estimated the Indian black money stashed away in Swiss banks at hundreds of billions of dollars.

“Such agreements can enable money to flow back into the country to boost economic development,” Ernst & Young tax partner Rajiv Chugh said. “Without entering into debate on the efficacy of voluntary disclosure scheme, India had in the past come out with a VDS to bring unaccounted money into the tax ambit. Notwithstanding the disclosure scheme, a large amounts of money are still outside the tax system as per recent reports,” he said.

The government recently said that once the revised treaty with Switzerland becomes operational, India would start getting banking information from April 1, 2011. India and Switzerland, on August 30, 2010, signed a protocol amending the Double Taxation Avoidance Agreement. In July this year, the government received a list of some 700 bank accounts in Switzerland from the French government and investigations are under way to determine whether any of the account holders evaded taxes.

In May this year, the government had constituted the panel to look into strengthening of the law to curb black money generation and examine the existing legal and administrative framework. The committee is also considering declaration of the wealth generated illegally as a national asset. It will submit its report in six months.



Source: Financial Express

1 comments:

Sadhana said...

This is such valuable information! Thanks for sharing!
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