The revised tax treaty between India and Switzerland, to enable access to Swiss accounts of tax evaders, seems to have hit bureaucratic hurdle as the two governments are yet to notify each other on the required legal and procedural approvals. As per an agreement between the two countries, the information exchange was expected to take effect on 1 January.  However, Switzerland’s Federal Tax Administration department told PTI that the protocol, signed between the two nations last August, was still to take effect as they were yet to inform each other about extending the necessary approvals.

Finance minister Pranab Mukherjee and Swiss federal councillor Micheline Calmy-Rey signed a “protocol” to amend the double taxation agreement (DTA) in the area of taxes on income on 30 August 2010.

“This Protocol has not entered into force yet, since the governments of the Contracting States have not notified each other through diplomatic channels that all legal requirements and procedures for giving effect to the Amending Protocol have been satisfied,” a Federal Tax Administration spokesperson said.

“In Switzerland the Parliament has not agreed upon the protocol yet,” the spokesperson said in an emailed reply.

The information exchange might now come into force from the next fiscal, beginning 1 April 2011, if necessary conditions are met by March-end.

“The exchange of information will be applicable for information that relates to any fiscal year beginning on or after the 1st January 2011, as soon as the protocol has been given effect,” the spokesperson added.

The revised tax treaty was expected to facilitate the Indian government seeking details about illicit wealth allegedly stashed away by Indians in Swiss banks.

The issue of Indians having secret Swiss bank accounts has become a political hot potato, amid reports of Indians having billions of dollars in banks in Switzerland. But, there are no official figures as such.

The revised tax treaty agreement was reached after months of negotiations, even as the Swiss banks have said that they would not permit “fishing expeditions” — meaning unwarranted and indiscriminate trawling through bank accounts in the hope of finding something interesting.

The Swiss Bankers Association had previously said that any information exchange would be according to the conditions set out by the Organisation for Economic Cooperation and Development (OECD), the grouping of mostly developed nations, and the information being sought should be specific in nature.

As per the revised treaty, Switzerland would now provide administrative assistance in tax evasion cases also, in addition to the tax fraud cases applicable earlier.

“This will require the income tax department to deploy considerable resource and energy on criminal investigation. Effective criminal investigation will necessarily include a comprehensive international strategy to combat offshore tax evasion, and fund flows that threaten security of the country.”
The document, which will undergo a mid-term review in 2013, aims at taking forward the strategic planning of the department and its policies from 2011-2015 along with the new Direct Taxes Code (DTC) which is proposed to replace the current Income Tax Act from next fiscal.

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