New Swiss tax treaty needs further improvement

14 November 2011: The Tax Treaties which are signed between India & Switzerland in order to ensure avoidance of double taxation and exchange of information for prevention of evasion or avoidance of income-tax need to be changed. It is a general perception that a very substantial amount beneficially owned by Indian residents is lying stashed in Swiss Banks. However, the said amount continues to escape tax in India despite a comprehensive Tax Treaty between India and Switzerland since 1994.

The treaty did not serve the purpose because it had some limitations due to which relevant information from Swiss Banks could not be obtained. It provided that the contracting State will share information which is at their disposal under their respective taxation laws in the normal course of administration. The domestic laws of Switzerland do not allow sharing of information by the Banks, Financial Institution etc. with the Swiss tax authorities in the normal course. Therefore, the information could not be passed on to the Indian tax authorities. Hence, the Union Govt. of India signed a Protocol with the Government of Switzerland in August 2010 for the purpose of amending the Indo-Swiss tax treaty.

Source: Business Standard