Swiss banks moving 'full speed' on automatic tax info exchange

Geneva: Swiss banks are working at "full speed" to implement the automatic tax information exchange regime that will help India's efforts to crackdown on illegal wealth stashed by its citizens in Switzerland.

The Alpine nation, known for banking secrecy practices, has come under international pressure amid various countries including India stepping up their fight against the black money menace.

India is probing hundreds of its citizens for suspected stashing of unaccounted wealth in Swiss banks and their names are part of a much longer list of account holders in HSBC's Geneva branch which was 'stolen' by a former bank employee. The list later found its way to the French government, which had shared the relevant names with India.

As part of global efforts to curb flow of illegal funds in the financial system, Switzerland has agreed to be part of the automatic tax information exchange framework, which is expected to be in force from 2017.

The leading Swiss bankers' grouping SBA today said its members are working at "full speed" for implementation of the Automatic Exchange of Information in tax matters (AEOI).

Under this framework, Switzerland would share information with India and various other countries.

Once this regime is in place, Swiss banks would start collecting information on bank accounts and securities portfolios held by taxpayers domiciled for tax purposes in AEOI partner states. The information gathered would then be provided to the Swiss Federal Tax Administration (FTA), which would share it with partner states.

In its annual Banking Barometer report, the Swiss Bankers Association (SBA) said banks are working on the "practical implementation" of the future standard.

Legal basis need to be put in place for Swiss banks to exchange tax-relevant information and in this regard, the Swiss Federal Council has submitted the dispatch for implementing AEOI framework to the Parliament in June.

"Parallel to this, the Swiss banks are now working on the practical implementation of the future standard through large-scale projects," SBA said.

So far, Switzerland has signed an agreement on the introduction of the AEOI with the European Union besides a joint declaration with Australia. Further agreements are currently being negotiated.

"In the first half of 2015, Switzerland reached its first agreements for the automatic exchange of information in tax matters (AEOI). Negotiations for further agreements are currently underway," SBA noted. 

Switzerland has proposed amending its laws to share information with foreign countries probing tax crimes on the basis of 'stolen data', provided details have come from administrative channels or public sources.

A bill on this was approved yesterday by the Swiss Federal Council and it would be discussed in Parliament after a public consultation process.

At present, laws in Switzerland do not allow 'mutual assistance' to the requests based on stolen data.

The proposed change in the law would make it much easier for India to get the required information about those suspected to have stashed black money in HSBC's Geneva branch, as the information has been received through its "normal administrative assistance channel" with France.

The Federal Council has initiated the consultation proceedings on the revision of the Tax Administrative Assistance Act, which provides for an easing of Swiss practices with regard to stolen data.

According to SBA's latest report, banks in Switzerland managed CHF 6,656 billion (about USD 6,860 billion) at the end of 2014, an increase of CHF 518 billion compared to 2013.

"This rise is the result of an increase in securities holdings, savings and investment liabilities to customers, and time deposits. The banks also benefited from strong inflows from emerging countries and transition countries in Europe.

"These inflows more than compensated for the decrease in assets from Western Europe arising from tax settlements," the report said.

Share of foreign assets under management stood at little over 50 per cent and with a market share of 26 per cent, "the Swiss banking sector remains the global leader for cross- border wealth management," it added.

The grouping noted that despite ongoing structural change, shrinking interest margins and a challenging market environment, Swiss banks reported a rise in both assets under management and net income in 2014.