India will get access to Switzerland's secret money vaults in 2018
Swiss banks that became synonymous with black money in India will no longer be an option for those who seek to launder their black money. Switzerland will share information on accounts by Indians in Swiss banks from January 1, 2018. The automatic exchange of information from January 1, 2018 will start in September 2019.
So far, India had to ask Switzerland for specific bits of information by proving that a valid inquiry was on against the account holder. The Swiss could delay or deny the information altogether.
A joint declaration for the implementation of Automatic Exchange of Information (AEOI) was signed last month between the two sides here and it provided that both countries would start collecting data in accordance with the global standards in 2018 and exchange it from 2019 onwards. The AEOI conforms to a norm set by global economic body the Organisation for Economic Co-operation and Development (OECD) for tax transparency.
Confidentiality and data protection requirements are to be strictly followed under the automatic information exchange framework. This process ensures the signatory always maintains control over its exchange partners and the treatment of the data exchanged, as per OECD.
The automatic exchange of information will discourage Indians from stashing black money in Swiss banks. Indian deposits in Swiss banks have been falling already.
The money held by Indians in Swiss banks stood at a record high of 6.5 billion franc (Rs 23,000 crore) by 2006-end. However, it has been falling since then, except for in 2011 and in 2013 when it had risen by over 12 per cent and 42 per cent, respectively.
It declined to a record low of 1.2 billion franc (about Rs 8,392 crore) at the end of 2015, according to data from the Swiss National Bank. In 2016, India slipped to 75th place in terms of money held by its citizens with banks in Switzerland. India was placed at 61st place in 2015, while it used to be among top-50 countries in terms of holdings in Swiss banks till 2007. India was ranked highest at 37th place in 2004. Such rapid decline in Indian deposits in Swiss banks leaves the Indian government with less chance of making big catches. Now that the account holders know their cover will be blown, the decline in deposits will only quicken.
Though the deal will do little by way of bringing back black money from Swiss accounts, it will have a deterrent effect. The black money hoarders will be under pressure with one big safe haven gone off their list.
In its war on black money, India has also signed treaties with Mauritius, Singapore and Cyprus to prevent round-tripping of funds.