How to unearth Indian black money in Switzerland

The government of India has signed a Protocol with the government of Switzerland in August 2010 for the purpose of amending the Tax Treaty between the Swiss Confederation and the Republic of India.

The protocol has been signed with the intent to enable the government of India to access the accounts maintained in the Swiss banks by the Indian tax evaders and to gather such other informations as may be necessary to tax the unaccounted money stashed in Switzerland.

The government of India took note about the money kept by the Indian tax eva-ders in Swiss Banks, which is estimated at around $462 billion.

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The effort of the government is to bring the money back to India and also to collect due taxes which might have been evaded.

However, this protocol which was intended to take effect from 01st Jan, 2011 has not entered into force yet, since the entire legal requirements and other procedures which are necessary for giving effect to the amending protocol have not been notified by the governments of the contracting States.

The amendment is still to be approved by the Swiss Parliament.

The above step of the government has been widely acclaimed by the public at large.

In fact, a Public Interest Petition is also being heard by the Hon'ble Supreme Court these days where the Apex Court has taken this problem very seriously and has questioned the government by observing "it is a pure and simple theft of the national money.

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"We're talking about mind-boggling crime. We are not on the niceties of various treaties".

It is, however, felt that unearthing black money kept in Switzerland may not be as simple an exercise as is being communicated by the government circles.

Amendment of Tax Treaty with Switzerland will certainly help, but this alone will not be enough and sufficient to rope in those who have stashed money outside India.

Let us not forget that a particular individual's money may infact be lying in the name of a different person, quite often a foreigner to India.

It is unthinkable that any clever Indian would keep money in a Switzerland Bank in his own name.

It is also reported that the money in Switzerland may also be in the name of some discretionary off-shore trusts.

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Likewise, there would be difficulties in tracing the trail of money if the money is invested by the person concerned outside Switzerland or in circuitous manner with the protective layer of several tax haven countries.

It is also possible that the money is kept in safe custody like locker etc. instead of bank accounts.

In all such cases, a mere amendment to the tax treaty may not be sufficient.

The protocol involves a cumbersome procedure whe-reunder the Indian compe-tent authority has to provide exhaustive and exact details about the persons in respect of whom information is required from Switzerland.

What about the cases where such an exhaustive information is not available with the Indian authorities?

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It is also to be kept in mind that a person who maintains bank account in Switzerland for the purpose of parking the unaccounted money earned in India by dodging the Indian tax and other authorities must be an intelligent and powerful man.

Such a person will also know how to close his account and transfer all his funds to other places without leaving any trail.
For this he does not require much time.

In this context the action of the government to announce an amendment in August 2010 and to give it wide publicity is more than enough to give a chance as well as time for transfer of funds to other safe tax havens.

It is like an intimation of the raid before the raid is actually conducted.

It is felt that all this publicity about amendment in the tax treaty will only help the offenders to escape.

The author is a senior partner in S S Kothari Mehta & Co.