India gets Fourth Set of Swiss Bank Account Details

Context

Recently, India has received the fourth set of Swiss bank account details of its nationals and organizations as part of the annual information exchange.

Probable Question

Why it is often preferred to park money in a Swiss bank account? Examine the initiatives taken in this regard.

About Receiving Information from Switzerland for India

• The two countries entered into an Automatic Exchange Of Information (AEOI) agreement in January 2018 and exchange the first set in 2019.
• AEOI is an effort to bring transparency and restrict money laundering, since 2017.
• In India the information received is kept in the custody of and for action by the Central Board of Direct Taxes (CBDT).

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Automatic Exchange Of Information (AEOI)

• AEOI is an international standard that governs how tax authorities in the participating countries exchange data relating to taxpayers’ cash and custody accounts. 
• Turkey, Peru, and Nigeria are added recently to the Swiss AEOI list.
• AEOI 2022 exchange exercise: Switzerland has just concluded its exchange of information with 101 countries; with details of around 3.4 million financial accounts.
• The Swiss Federal Tax Administration office has also informed that with 74 of these 101 countries, the information exchange was reciprocal.

The nature of Financial data:

• Name, 
• Address, 
• Country of residence, 
• Tax identification number, 
• Information concerning the reporting financial institution, and account balance and capital information.

Guidelines for the exchange of such sensitive banking information:

• The Paris-based international body, the Organisation for Economic Co-operation (OECD) and Development (OECD), set the guidelines and parameters for the AEOI.
• The annual exercise of AEOI exchange is strictly meant for “tax only” purposes.
• Under the OECD’s guidelines, no details of the quantum of funds or the names of account holders are to be publicised. 
• The OECD developed the Common Reporting Standard (CRS) in 2014, which allows every country to obtain data from Financial Institutions (FIs) and “automatically” exchange it with countries with which AEOI agreements are in order every year.

Scope of India’s AEOI Network

• India presently shares bulk financial and banking information with 78 countries and receives the same from 107 countries, with Switzerland is known to be sharing some of the most voluminous data, under the OECD umbrella of AEOI.
• Foreign Asset Investigation Units (FAIUs):
  • The Central Board of Direct Taxes (CBDT) has set up a network of Foreign Asset Investigation Units (FAIUs), due to the large volume of Financial Information data from 100 countries.
  • The FAIUs are in 14 of CBDT’s investigation wings, to which the information of that region that has reached India via the AEOI route is transmitted in a secure manner.
  • FAIUs do the follow-up probe of the FI data.
  • FAIUs investigate whether the taxpayers have declared the  foreign bank account/s in tax returns or not.

Question of ‘Black Money’

• Political Issue: Indians stashed away their black money in Swiss banks, and bringing it back is often promised by the parties and political functionaries. 
• Cooperation by Swiss Authorities: It is claimed by the Swiss authorities then cooperate with the Indian government to fight tax evasion and fraud.
• Automatic exchange of information Agreement: It is a significant initiative for providing details of all Indian resident's accounts.

Also Read: Paper on India's Poverty: World Bank

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News Source: The Indian Express

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