India-Swiss tax pact won't cover past transactions

Source:BL Bureau::New Delhi, Aug. 31

Those hoping that the Government will be able to get details of secret bank accounts from Switzerland are in for disappointment.

The latest protocol amending the Double Taxation Avoidance Agreement (DTAA) between India and Switzerland says only prospective information can be shared, not past information. The protocol was signed on Monday. It will come into operation only after the Swiss side completes certain internal processes.
he protocol paves the way for sharing of banking information between the two sides to enable enforcement of domestic tax laws.


Under the existing DTAA, India was not able to obtain banking information from Switzerland.

“There is a specific provision for providing banking and ownership information. The new provision will be applicable only for prospective information and not for past information,” Mr Pranab Mukherjee, Finance Minister, told the Lok Sabha on Tuesday while making a statement on the protocol.

Mr Mukherjee said: “Please remember that this is an agreement between two sovereign countries. They are not subordinate to us. We shall have to agree (to) whatever concession we get.”

The Finance Minister turned down the BJP leader, Mr L.K. Advani's suggestion that the House take up today for discussion the details of the protocol and its implications. Mr Mukherjee, however, offered to discuss the matter in the next session, adding that it was important to have a discussion as this issue will come up before Parliament time and again.

The protocol will amend the Article on Exchange of Information to bring it in line with international standards. Under the new article, the information exchange is to be used only for tax purposes. However, it also provides for use of information for purposes allowed under the laws of both the countries and if the competent authority of the supplying State authorises such use. There is also a specific provision to ensure that information will be exchanged even if there is no domestic interest.

Currently, the income from international shipping is not covered under the DTAA. There will now be residence-based taxation for shipping income from international traffic.

Recognised pension fund or scheme will also be able to get the benefit of India-Swiss DTAA.

krsrivats@thehindu.co.in