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Secrecy clauses: India talks to Swiss authorities

Last Updated: Sunday, July 19, 2009 - 22:47

New Delhi: India is negotiating with
Switzerland and other countries to revise the secrecy clause
in bilateral treaties like double taxation avoidance
agreements to get information on matters like black money.

Official sources said unless secrecy clauses change, the
government cannot do much about black money stashed in banks
of Switzerland and other countries.

India is negotiating with Switzerland and other
countries to change these secrecy clauses in the Double
Taxation Avoidance Agreement (DTAA).

If these clauses change, appropriate Indian authorities
could have information, which currently is exchanged only with
tax authorities, they said.

The issue came to the fore during the Lok Sabha election
when opposition parties demanded repatriation of black money
stashed away in tax havens.

Sources said the government is negotiating with Mauritius
to amend the DTAA to prevent companies routing investment
through that country to India, to avoid paying taxes.

Various companies have been incorporated in Mauritius to
take advantage of the Indo-Mauritius treaty, which is called
treaty shopping.

According to the treaty, capital gains are to be assessed
in accordance with the law of the state of residence of the
entity. Under Mauritian law, tax is not levied on capital gains,
which means that capital gains made by an Mauritian entity on
transfer of shares in an Indian company go unassessed.

Mauritius provides these tax exemptions as it is building
itself as a financial hub.

Sources said India is prepared to compensate Mauritius
for financial losses if the treaty is amended.

Earlier this year, Switzerland had agreed to ease the
country`s strict banking secrecy rules and co-operate with
the tax authorities of other countries in areas where fraud is
suspected, even as other tax havens like Austria and
Luxembourg said they would consider easing secrecy laws on a
case-to-case basis.

Switzerland`s offer came after talks with the
Organisation for Economic Co-operation and Development (OECD),
which sets rules on bank data sharing. The OECD has been
spearheading a campaign in favour of transparency and
exchange of information on tax matters.

Luxembourg and Austria said they would relax their
banking secrecy laws and co-operate with foreign tax
authorities in cases where fraud is suspected.

Pressure is mounting on tax havens to ease bank secrecy

Earlier, the UPA government had filed an affidavit in the
Supreme Court saying that it had taken steps regarding
Indians` black money in certain foreign banks.

Regarding deposits in Switzerland banks, the affidavit
had said that consequent to the government’s teamwork with the
international community, Switzerland has agreed to make its
"guarded" banking laws and rules more transparent, in
accordance with the global standards.

The affidavit was filed in response to a public interest
petition filed by former Law Minister and eminent jurist Ram
Jethmalani and five others who have been seeking a direction
for the government to take action to bring back money to the
tune of "Rs 70 lakh crore" stashed in foreign banks.

Bureau Report

First Published: Sunday, July 19, 2009 - 22:47

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