New Delhi: As they continue their efforts to clamp down on the menace of black money, India and other countries will have to wait at least till 2017 before the new global standard for automatic exchange of tax information comes into effect.
India, Switzerland 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 endorsement of the ‘Declaration on Automatic Exchange of Information in Tax Matters’ under the aegis of think-tank OECD last week had paved the way for finalising a single global standard in this regard later this year in September.
“The effectiveness of AEOI (Automatic Exchange of Information) will come only when the standard is translated into domestic legislations and hardware in banks’ IT. This means that AEOI will take place in 2017 at the earliest,” Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, told PTI from Paris.
Paris-based Organisation for Economic Cooperation and Development (OECD) sets the global tax standards and frames conventions against tax frauds, among others.
With respect to automatic exchange of tax information, he said things are at early stages in terms of developing the standard as well as “getting the commitments”.
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.
By becoming part of the declaration, these countries have committed to implementing automatic exchange of tax information. The declaration also comes as a boost for India, which is making efforts to get details from Switzerland on alleged illicit funds stashed away by Indians there.
Automatic exchange of information would allow for “collecting all bank information on non-resident to pass this information on to the countries of residence of these taxpayers so that they can no longer hide money on offshore accounts,” Pascal Saint-Amans said.
Many countries worldwide are taking steps to address the menace of illicit funds being stashed away in tax havens.
Meanwhile, the declaration on automatic exchange of information in tax matters was endorsed last Tuesday by all 34 member countries of OECD along with Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa.
The standard was developed at the OECD and endorsed by the G20 Finance Ministers.
“At this point in time, exchange of information (EOI) on request is the only standard which is implemented, including between India and Switzerland.
“… India has already a treaty with Switzerland to exchange information on request. The quality of this exchange is assessed by the global forum on transparency. AEOI is a step forward,” said Pascal Saint-Amans.
According to him, Switzerland was evaluated by the Global Forum and was assessed as not having its legal framework in place to effectively exchange information.
“This assessment is a general one and not a judgement by the Global Forum of its relationship with India. As a result of the assessment, Switzerland is not moving to Phase 2 of the reviews of the Global Forum which aim to assess the effectiveness of EOI,” he noted.
Against the backdrop of India stepping up pressure for data on alleged illicit funds parked in Swiss banks, Switzerland last week 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.
The Swiss government’s latest response came against the backdrop of Finance Minister P Chidambaram shooting off another letter to his Swiss counterpart raising concerns about the Alpine nation denying information on alleged unaccounted money held by Indians in banks in Switzerland.
In the letter, Chidambaram had strongly objected to Switzerland’s denial of information about account details of certain Indians at HSBC’s Swiss bank branches, in whose cases “incriminating evidence of tax evasion” have been found.
“Like India, Switzerland is committed to fighting tax evasion and in this regard wishes to cooperate with India in the matter of administrative assistance within applicable law,” a Swiss Federal Department of Finance spokesperson had told PTI.
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.