Threatens action for not honouring DTAA

Outgoing Finance Minister P. Chidambaram has threatened action by India against Switzerland at global forums such as G20 for its persistent denial to share information on Indians stashing money in its banks. The G20 can impose sanctions for the protection of the member countries’ public finances and financial systems.

The Swiss authorities, through a letter dated February 20, have suggested that they are ‘closing’ India’s requests in 562 cases.

In a two-page letter to the Swiss Finance Minister Eveline Widmer Schlumpf, dated March 13, but released on Thursday, Mr. Chidambaram wrote that the Swiss have blocked India’s requests for information despite the G20 leaders’ April 2009 declaration that had stated that the “era of bank secrecy is over”.

He further wrote that India could proceed to declare Switzerland a non-cooperative jurisdiction if it’s noncooperation continues. “Switzerland’s refusal to provide information to India and other countries on the grounds that the source of the information requested is based on ‘stolen data’ means that, in practice, Switzerland still believes in bank secrecy, and is, therefore, not in tune with the modern era,” he wrote.

According to Mr. Chidambaram, Switzerland has not honoured its Double Taxation Avoidance Agreement (DTAA) with India. Indian tax authorities have sought information on Indians with accounts in Swiss banks under the DTAA.

“If information continues to be denied to India under the DTAC (Double Taxation Avoidance Convention), the Government of India will be constrained to take a position in the global forum,” he wrote in the letter to his Swiss counterpart.

He has also warned of action against Switzerland under India’s domestic laws if the denial of access to information sought continues. Though he did not spell out the details, India has the option of making unavailable to Swiss investors benefits under the DTAA between the two countries.

“In view of your assurance that the Swiss government is keen to cooperate with India and to find possible ways of complying with our requests for information under the DTAC, a bilateral discussion at the official level was held in New Delhi on February 4 and 5, 2014. However, no progress was made during the discussions and the Swiss delegation merely reiterated their previously stated positions and refused to consider any options or alternate approaches,” Mr. Chidambaram wrote.

Revision of laws

The letter suggests that the revision of its laws for providing information under the tax treaties it has signed with India— that the Swiss government had proposed—has not taken place due to political opposition in Switzerland.

The revision could have enabled it to provide information to India in the HSBC case even in respect of the ‘stolen data’.

In 2011, the Indian government had received the names of 782 Indians, who had accounts with HSBC. Mr. Chidambaram wrote that he hopes that the Swiss government would be able to persuade its Parliament to agree to the proposed changes in its domestic law to comply with internationally accepted standards and conventions.

“Switzerland cannot violate its obligations under the DTAC with India on any ground, including on moralistic grounds, when the Government of India has all along acted in good faith and has requested the information in a bona fide manner,” he wrote.