News:India has received the first tranche of details about financial accounts of its residents in Swiss banks under the automatic info exchange framework.
Facts:
- In 2016,India and Switzerland had signed an Automatic exchange of information(AEOI) deal on bank accounts which came into effect from September 2019.
About Automatic exchange of information(AEOI):
- Automatic exchange of information involves the systematic and periodic transmission of taxpayer information by the source country to the residence country concerning various categories of income.
- This automatic exchange of information(AEOI) is to be carried out under the Common Reporting Standard (CRS).
- CRS is the global reporting standard for such exchange of information, which takes care of aspects such as confidentiality rules and data safeguards.
- The CRS has been developed by the Organisation for Economic Cooperation and Development(OECD).
- However,under the agreement,India will not receive information on bank accounts of Indians in Switzerland prior to 2018.
Significance of AEOI:
- AEOI is needed as tax payers operate cross border whereas tax administration is limited to national borders.
- This has helped tax evasion by shifting money to other countries by citizens.
- Hence,there is a need for tax cooperation and tax information exchanges between countries.
- This step is also likely to shed more light on the wealth Indians have stashed away in Swiss bank accounts.
Additional information:
- According to the data released by the Swiss National Bank(SNB),India has moved down one place to 74th rank in terms of money parked by its citizens and enterprises with Swiss banks.
- Among the top-ranked jurisdictions, the UK is followed by the US, West Indies, France and Hong Kong in the top five.
- The top-five countries alone account for more than 50% of the aggregate foreign funds parked with the Swiss banks.
