Swiss banks have offered to tax the money deposited with them by Indians and other foreigners and “immediately deliver the cash” to governments of respective countries, rather than sharing the details of their clients. Switzerland has come under increasing global pressure to share information about black money stashed in its banks. Possibly as a response, Swiss banks have now offered to tax their foreign clients’ assets but are still wary of sharing details of their customers on grounds of privacy.
“The Swiss Bankers Association is convinced that the flat-rate withholding tax model it is proposing is a much more efficient way to ensure tax compliance than any system of automatic information exchange,” a top SBA official said.
Admitting that opting for a withholding tax would have the advantage of safeguarding individual privacy, the official said an ‘automatic exchange of information’, as demanded by some countries, would not throw much light on the revenue to be generated by such exchange.
“By contrast, the flat-rate withholding tax model would immediately deliver cash,” the official said. He added that the proposal is already generating interest among European countries which have been consulted so far. The official, however, did not elaborate on whether India has been consulted or not.
India, where there has been a long-running demand for concrete action to bring back black money stashed in highly secretive Swiss banks, began talks late last year for a revised tax treaty with Switzerland so that it could get details about defaulters.
Besides India, many other countries are also said to be looking at similar treaties, while the US last year had reached an agreement for giving access to close to 4,450 bank accounts of Americans with Swiss banking major UBS.
As an alternative to information exchange, Swiss banks have mooted the idea of a ‘universal withholding tax’ – wherein they would tax the earnings from foreigners’ deposits and transfer the proceeds to the governments of the country concerned – and are currently discussing the same with the relevant authorities.
When asked about the proposal and its applicability to the wealth deposited by Indians in Switzerland, the SBA spokesperson had last September said it would be discussed with the Swiss authorities. In its latest paper detailing future strategies for the banking sector, SBA said it rejected the concept of a “fully transparent bank client”.
“Swiss banks have developed a comprehensive flat-rate tax solution model as an equivalent solution to automatic exchange of information. The model allows all taxable investment income and capital gains to be recorded in accordance with the tax law of the treaty state concerned and the tax payable on them to be withheld and transferred anonymously to the responsible tax authorities,” the paper noted.