Indian Black Money law and Swiss Tax treaty, Acche Din aagaye?
The assumption people of the country have is that rich Indians have a bank account at the Swiss Bank. These accounts have their black money deposited. Since the bank is overseas, the law of the land (Switzerland) has its own rules and restrictions. These laws and information sharing restrictions were used as a privilege for the account holders. Until a year ago, when the Swiss Federal Court passed a judgment in relevance that the ‘principle of specialty’ information from the administrative assistance can be used only for the tax purposes was mentioned in the agreement.
The Black Money Act (Undisclosed Foreign Income and Assets) was passed in 2015 and has been in action since April 1, 2016. The Swiss Tax treaty was signed in 2011. The treaty was signed as a result of differences in criminal law provisions under the Black Money Act and that of the Income Tax Act. It has the provisions for the ‘exchange of information’.
The provision gives authority to the Swiss bank to share information with the Indian government. The law is applied retroactively, which means the implementation can be made effective from a backdate than the actual date of the law being in force. This could result in harsh effects leading to stricter criminal proceedings than the time the actual crime was committed.
Indians, in dozens, are showing up before the Swiss Federal Court to stop this law in effect. The Enforcement Directorate (ED) now can haul people to court in cases like money laundering as the Income Tax department share the collected data with ED on regular basis.
How is it beneficial for India?
This treaty could help Indian tax authorities to dig deeper into the information received. The information is from the year 2015 and before the year when Black Money Act was passed.
Under the I-T Act, tax can be claimed on any income that has not been disclosed for 11 years but under the Black Money Act, undisclosed assets are questionable. The tax authorities can thoroughly check and the promise made by the government to reduce black money in the country can be achieved with the appropriate information shared by the Swiss Bank Authorities.
Swiss’s double standards?
The local law in Switzerland follows that the information shared by it should not be contradictory to the public policy of the country the information is shared to. The catch here is that Swiss law does not allow a ‘retrospective’ approach. The local law of the country won’t permit the application of retrospective law in any country. So, even if the Swiss bank share information it cannot be used in India or any other country as a matter of fact for criminal proceedings. The account holders cannot be accused of any criminal charges even after they have the proofs to support the claim.
In the upcoming hearing at the Swiss Federal Court, it will be interesting to look at the judgments that are to be passed. As the agreement clearly states black money requests information but ironically the information cannot be used for criminal proceedings if any. It can be used only after official approval from the Swiss authorities. This particular law of the country made a political issue not only in India but internationally.
The condition on which the law works is that after the information is shared it should be ‘foreseeably relevant’ to income tax or any other similar tax in India. With the new law and the treaty working, only after the passing of judgment it could be assessed how useful it could be and how much black money could be curbed. This brings light and hopes to curb black money wherein ‘Acche Din’ can be truly experienced.
Published by Diwakar Kumar
Edited by: Aaradhana Singh
