Public interest in getting back the money stashed away illegally in Switzerland and certain other centres by Indians seeking to avoid taxes has never before been so high. While public perceptions have remained strong over the years, the issue continues to defy workable solutions. A major reason is that there is hardly any accurate information about the quantum of money salted away or the identity of the depositors. There are, as of now, vague estimates of the amount kept away — these range from Rs.30 lakh crore to Rs.70 lakh crore. The wide range is an indication of the complete absence of reliable official data. Banks in countries such as Switzerland have for long been wedded to secrecy as far as customer information is concerned. In fact, it is this secrecy along with some other positive features — notably, the extremely stable political and economic environment — that has made these countries most attractive for overseas investors. Adding to the complexity is that not all transactions by Indians with banks in these tax havens need be violative of Indian laws. Over the years, India’s foreign exchange rules have been liberalised substantially. It is possible for many categories of individuals and companies to maintain foreign exchange accounts abroad. Capital transfers are freely allowed up to $200,000 a year.
Indications are that the flow of money to tax havens has increased despite fewer exchange controls and the sharp cuts in personal tax rates. For India, like many other countries, tax evasion by the wealthy poses a threat to public finance. A growing international backlash against tax evasion has prompted many countries including India to take steps to pierce the veil of secrecy. G20 countries have declared their resolve to compel tax havens to adopt international codes of conduct and information-sharing. India will begin its first round of negotiations with the Swiss authorities in December but it is conceded by both sides that getting information from Swiss banks will not be easy. To begin with, the Government of India needs to have a proper bilateral treaty of the type the Swiss government has recently entered into with some 90 countries. In addition, it needs to buttress its case through hard facts and evidence. A recent deal struck between the United States and Switzerland allows the U.S authorities access to 4,450 secret accounts in a leading Swiss bank, UBS. The deal, which was hailed as a blow for fairness in taxation, was won after the U.S authorities could prove that the Swiss bank was complicit in wealthy Americans evading taxes.