Unlike the United Kingdom, India cannot have a treaty with Switzerland under which the deposits of Indians in Swiss banks would be taxed by the European nation, says the Central Board of Direct Taxes (CBDT). “We cannot have such a treaty with Switzerland because the environment is not conducive,” said a senior CBDT official when asked if it was possible for India to have a similar tax treaty as was negotiated between the UK and Switzerland. As part of the tax treaty, the Swiss government recently agreed to tax black money held by UK citizens in Swiss bank accounts while still hiding their identity.
According to a recent BBC report, the deal could see between 3 billion pounds and 6 billion pounds a year being handed to HMRC (Her Majesty’s Revenue and Customs) by the Swiss authorities. The agreement is a part of the HMRC’s latest efforts to track down and tax money hidden in offshore bank accounts.
Earlier, a similar deal was reached between Germany and the Swiss authorities.
Pointing out that developed nations in Europe are facing problems, the CBDT official said, “Issues of advanced countries are different. Their economies are in slowdown mode. They need revenues and their priority is tax.”
Tax experts, however, want India to explore the possibility of entering into similar pacts with Switzerland to check the menace of black money and increase revenue collections. UK-Switzerland treaty has opened a new chapter and new order to deal with tax havens. Now other countries can also negotiate similar treaties with Switzerland.
India had in August last year signed a revised Double Tax Avoidance Agreement (DTAA) with Switzerland and the pact will come into effect once the formalities are completed. Upon entry into force, the revised DTAA will allow India to obtain banking information from Switzerland in specific cases with prospective effect from April 1, 2011, onward.