NEW DELHI: The Indian Tax authorities and the Swiss government could be headed for a showdown over what the Indian side regards as lack of co-operation from the Alpine country over access to information on bank accounts.

Last week Finance Minister P Chidambaram wrote to his Swiss counterpart – officials aware of the letter’s contents describe it as strongly worded warning that India might examine further steps if co-operation was not forthcoming. These steps could include declaring Switzerland a so-called non-cooperative jurisdiction, a finance ministry official said. If this were to happen investors from Switzerland would not be able to claim benefits under the double-taxation avoidance agreement (DTAA) between the two countries.

The letter reiterated the Indian stance that the Swiss had not honoured the terms of the DTAA between the two nations, under which information about Indians with accounts in Swiss banks has been sought by the tax authorities. “In the letter, both HSBC and non-HSBC references have been mentioned, and information about foreign accounts sought”, added the official. “In the same communication, Swiss authorities have been asked to obtain domestic approvals and provide information about account holders,” the finance ministry official said.

Discussions in February between the two countries were inconclusive as both sides reiterated stated positions. “The visit of Swiss delegation in February served no purpose as both sides reiterated their position, which has now led to a complete deadlock. We have the right to declare Switzerland a non-cooperative jurisdiction”, added this official, who requested anonymity. Last year, India had declared Cyprus a Non-Cooperative Jurisdiction and suspended tax benefits available under the bilateral tax treaty signed in 1994.

Earlier, Finance minister P Chidambaram in December had written a letter to his Swiss counterpart, who in her reply sent in January, cited domestic laws for her country’ inability to share details on bank accounts. ET on March 3 had reported that the letter from the Swiss finance minister said notifying the account-holder of the fact that tax authorities of a foreign country were making enquiries is in line with Swiss bank secrecy laws. If the account-holder declines to part with the information, the Indian government could challenge such non-cooperation in Swiss courts, the official familiar with the communication had told ET.

Switzerland’s finance minister had stated that the 2011 Double Taxation Avoidance Agreement, under which India had sought information, applies prospectively, thus ruling out access to information about accounts opened before that date. In the recent past, Indian government’ efforts have focused on the so-called HSBC list — which was passed on to India by the French authorities, who in turn obtained the names from a disgruntled employee of the British bank. A senior IT official said, “This is a sovereign request and information has to be shared under Article 26 of the treaty signed between the two countries, which overrides Swiss domestic laws.”


In his budget speech on February 17, Finance Minister P Chidambaram had spoken of “several hurdles” in obtaining evidence from foreign countries about offshore accounts held by Indians. “The government has succeeded, through alternative methods and special efforts, in obtaining information in 67 cases and action is underway to determine the tax liability as well as impose penalty. Prosecution for willful tax evasion has been launched in 17 other cases. More enquiries have been initiated into accounts reportedly held by Indian entities in no-tax or low-tax jurisdictions,” FM had said in his budget speech.