The Swiss Federal Council said that the implementation of the information exchange is planned for 2018 and that the first set of data exchange would happen in 2019.
This decision by Switzerland comes as a great relief for Narendra Modi government who has vowed to bring back all the black money stashed outside India.
Starting 2019, India and Switzerland will exchange financial account information a move meant to flush out black money, much of which is parked in Swiss banks. Flushing out black money is one of the key initiatives of the Narendra Modi government, which swept to power in 2014 on an anti-corruption plank.
Authorities of India and Switzerland were in talks with each other for a long time for the introduction of the Automatic Exchange of Information (AEOI). The proposal to introduce AEOI with India “met with widespread approval from the interested parties who voiced their opinions in the consultations”, according to sources.
The Swiss Federal Council said it would soon notify the Indian government regarding the exact date from which the “automatic exchange” would begin. It added that it will prepare a situation report before the first exchange of data takes place somewhere around autumn 2019.
Switzerland has already introduced the Automatic Exchange of Information (AEOI) with at least 38 countries and territories, including 28 members of the European Union. It will start sharing the data with them in 2018.
During a meeting on Friday, the council approved the draft notification adding that the decision was not subject to any referendum meaning the implementation would not face any further bureaucratic delay.
The exchange of information will reportedly be carried out in accordance with the Multilateral Competent Authority Agreement (MCAA) on the Automatic Exchange of Financial Account Information.
For a long time, Switzerland has been considered a “safe haven” for black money stashed abroad by Indians. The decision by the Swiss Federal Council on the data exchange was reached after several rounds of negotiations between India and Switzerland. The decision was reportedly taken under the guidance of G20, OECD and other global organisations.
The G20 is an international forum for the governments and central bank governors from 20 major economies. It was founded in 1999 with the aim of studying, reviewing, and promoting high level discussion of policy issues pertaining to the promotion of international financial stability.
The Organisation for Economic Co-operation and Development (OECD) is an intergovernmental economic organisation with 35 member countries, founded in 1960 to stimulate economic progress and world trade.
It is a forum of countries describing themselves as committed to democracy and the market economy, providing a platform to compare policy experiences, seeking answers to common problems, identify good practices and coordinate domestic and international policies of its members.
According to the council, the proposal to introduce AEOI was met with “widespread approval from the interested parties who voiced their opinions in the consultations”.
“In concrete terms, the AEOI will be activated with each individual state or territory by means of a specific federal decree within the framework of this dispatch,” the council said.
“In the process, it will be checked whether the states and territories concerned effectively meet the requirements under the standard, especially those concerning confidentiality and data security. It is important for the Federal Council that a level playing field be created among states and that all major financial centres, in particular, be included”, the council included.
The central government has taken multiple steps to tackle the menace of black money which includes the much debated demonetisation of high value currency initiated in November 2016. The government has also introduced the Black Money, Undisclosed Foreign Income and Assets and Imposition of Tax Act, 2015, specifically to fight the menace.
As a result of voluntary declarations by citizens, Rs. 4,164 crore worth of undisclosed foreign assets saw the light of day. The government collected Rs. 2,476 crore by way of penalty and taxes on these declarations.
In the recent past, the government has taken several steps to effectively tackle the issue of black money, which include policy-level initiatives, more effective enforcement action on the ground, putting in place robust legislative and administrative frameworks, and integration of information and its mining through increasing use of information technology.
The deal obliges the nations to share a wide range of financial information from its financial institutions. The information, the government has said, includes “information about the ultimate controlling persons and beneficial owners of entities”.
Once the AEOI is implemented, India would be able to receive information from almost every country in the world including offshore financial centres. It would provide information about the assets of Indians held abroad and help stop international tax evasion.