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Tax pact to crack Swiss banks

business Updated: Aug 30, 2010 00:44 IST
HT Correspondent
HT Correspondent
Hindustan Times
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A subtle but significant shift is taking place in the way the government is dealing with the celebrated Swiss banking secrecy laws. India and Switzerland are close to signing a landmark tax agreement that could make things easier for sleuths, though some question marks remain.

Swiss foreign minister Micheline Calmy-Rey is scheduled to meet Finance Minister Pranab Mukherjee on Monday amid expectations of a new double taxation avoidance agreement (DTAA) that would pave the way for India to obtain information on money stashed away in secret accounts.

Finance Ministry sources said the government has concluded the renegotiation to widen the ambit of the bilateral tax treaty after initiating steps last year in an effort to unearth money stashed away by Indians.

“It is likely that an amended tax treaty will be signed on Monday,” said a source, who did not wish to be identified. At present, India has DTAAs with as many as 79 countries but not all of them have a provision for exchange of information related to taxation.

Last year, UBS, one of Switzerland’s largest banks, admitted to helping U.S. taxpayers hide accounts from the Internal Revenue Service (IRS). The US cracked down and forced UBS to give details concerning American customers.

The Centre has written to about 65 countries to amend existing tax treaties insisting on the adding Article 26 of OECD’s Model Tax Convention that allows governments to seek tax-related information. That provision is both an enabling and limiting factor for Indian sleuths.

What could come to pass in Switzerland has been seen already in the case of Liechtenstein, another offshore haven covered now by an Indo-German DTAA. Officials have cracked down in 18 cases and initiated penalty proceedings, a Finance Ministry official said.

Treaty hurdles

1 Not all of India’s 79 DTAAs provide for an exchange of information related to taxation.

2.The Centre has written to about 65 countries to amend existing tax treaties.

3.Amended treaty with the Swiss could be signed this week.