Battle against Black Money: Swiss banks ask Indians to disclose foreign assets

India has been grappling with the issue of black money stashed overseas with a bulk of it in different Swiss banks. Over the years, India has been trying to get the details of those Indian account holders and the amount stashed in these accounts. However, the attempts did not yield much dividend. During the Union Budget presented by the government for 2015-16, India’s Finance Minister Arun Jaitley had announced a new law that would curtail illicit money from being transferred overseas. The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was approved by the Indian Parliament in early 2015.

Giving a shot in the arm to the Indian government, investigating authorities and tax officials, the Swiss banks and other European banks have asked their Indian clients to disclose their accounts to Indian tax authorities. The banks have also asked their clients to give fresh undertakings to state that they are ‘in compliance’ with all the laws in their home countries. Under the new law, a three-month compliance window, till September end, has been given to the banks for disclosure of all undeclared foreign assets to safeguard themselves, from being accused of abetting the hoarding of untaxed assets. The bank account holders also have to pay 30 percent tax and 30 percent penalty to escape further punishment. This move has spooked the banks as well as the account holders as many account holders are of the view that even after paying 60 percent in taxes and penalty, if there is no immunity it is better to take the risk of government finding their assets abroad.

With the tax and penalty expected to be paid by December 2015, the income tax department is expected to give an acknowledgement to the taxpayer within 15 days by January 2016. The declaration made by the taxpayer in this regard will not be used as evidence for prosecution under the Foreign Exchange Management Act, IT Act, Wealth Tax Act, Companies Act, or Customs Act. However, there would be no immunity if the funds are later found to be unlawful gains.

The new law is being viewed by many of the account holders as a draconian law, due to a lack of immunity from prosecution. With the banks asking high net worth individuals and corporate account holders to disclose their assets, they have also asked clients for an auditor’s certificate to vouch for the clean status of their money. Switzerland is also said to be moving towards an automatic exchange of tax information with various jurisdictions that also includes India.

The tax evaders however, are looking to take advantage of the loopholes in the law with measures such as setting up multi-level trusts to obscure identity, transfer assets to third party abroad, changing residency by moving to Dubai, UK, Singapore, Hong Kong. They are even ready for litigation with the government.

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