NO THREAT TO CLIENT CONFIDENTIALITY

SWITZERLAND BANKERS ASSOCIATION ASSERTS

Facing a global crackdown including from India on their 'safe haven' tag, Swiss banks today asserted that "bank-client confidentiality" will not disappear and 'automatic information exchange' is not the only solution to the black money menace. The assertion comes at a time when Switzerland is in the process of implementing a worldwide 'automatic exchange of information' framework for sharing of details about suspected cases of tax evasion with India and many other countries that have joined an OECD convention in this regard. India is expected to start getting information under this regime from Switzerland, about bank account and other details of Indians, from 2018. "Bank-client confidentiality will not disappear, but it is undergoing far reaching-changes, particularly in tax-related issues," according to the Swiss Bankers Association, the apex body of banks based in Switzerland. Asserting that Swiss banks continue to resolutely implement their strategy of tax compliance, SBA said "criminals" never had any protection under bank-client confidentiality, as banks have always been under obligation to disclose client information about them. It further said that international standards were taking on an increasingly important role with regard to when a Swiss bank is required to disclose client information to tax authorities. "These standards are developed by organisations such as the OECD, of which Switzerland is a member. Switzerland is taking part in these developments for the very reason that tax evasion was never legal in our country. Since 2009, administrative assistance in the case of tax evasion has been part of Swiss double-taxation agreements in accordance with the OECD standard. Further to this, on October 9, 2013, our Government resolved to sign the Council of Europe and OECD’s convention on administrative assistance in tax matters. In addition to the exchange of information – which as an international standard in future may also be 'automatic' – there are other means for the prevention of tax evasion. "These include: the Swiss withholding tax on income from capital from domestic sources, the agreement with the EU on savings taxation, the flat-rate withholding tax agreements with Great Britain and Austria and the FATCA agreement with the US." SBA further said that Switzerland has recently sharpened the sanction for violation of bank-client confidentiality, which now includes cases in which somebody passes 'stolen' bank-client data on or sells it to a third party and an amendment to law in this regard "will most likely enter into force this year". While the Indian government has proposed a new law to bring to book those stashing illicit assets abroad, it expects automatic exchange of information with Switzerland and other countries to be of big help in its fight against this menace. In the recent past, India has stepped up its efforts in this regard, including by way of re-negotiating tax treaties with various countries. Many other countries are also taking steps to address the menace of illicit funds being stashed away in tax havens.

Under the OECD framework, more than 40 jurisdictions including India have agreed to become 'early adopters' of an 'automatic exchange of information' mechanism prepared by global body OECD to help each other in fighting the tax evasion and frauds. This early adopters group plans to collect data from 2016 and exchange information for the first time in September 2017. Switzerland would see its 'first exchange' under this framework taking place in the year 2018. As many as 58 countries would see their 'first exchange' taking place in 2017, followed by another 35 in the year 2018. While India is part of the 'First Exchange 2017' group, it will have to wait till 2018 for 'automatic exchange of information' with Switzerland because of the Alpine nation being in the second grouping. The details that would be shared include account number, name, address and date of birth, tax identification number, interest and dividends, receipts from certain insurance policies, credit balances on accounts, as also proceeds from the sale of financial assets. Under the exchange process, if a taxpayer in a Country A has a bank account in Country B, the bank would disclose financial account data to authorities in the Country B, which would automatically forward the details to authorities in Country A to help them examine the data. Once in place, the mechanism would help the Indian authorities to have a strong ground while seeking to bring back and tax the funds stashed overseas by its citizens. Talking about bank-client confidentiality, SBA said that "having one's privacy protected is a human desire." "Bank clients wish freedom for personal development, without interference from others and without being exposed publicly.... personal privacy enjoys constitutional protection, just as does, for example, personal freedom, freedom of religion and conscience, or freedom of speech. "This protection is, however, not absolute. It ends where the law places limits on it. This manifests itself whenever personal privacy is specified in more detail, such as in the case of data protection or bank-client confidentiality.
"When bank-client confidentiality was introduced by lawmakers in 1934, the intention was not to facilitate tax evasion; this has always been considered an offence in Switzerland," it said.
SBA further said: "The limitations that have been placed on bank-client confidentiality in recent years – for example the cross-border information exchange between tax authorities – never aimed to 'abolish' personal privacy, but rather to put a stop to the abuse thereof." It further said that bank-client confidentiality, under the Switzerland's Banking Act, "establishes professional confidentiality comparable to that of doctors, lawyers or priests. "Its aim is always to protect personal privacy – not to protect assets from the tax authorities. Furthermore, bank-client confidentiality is not the primary reason for the success of Swiss banks. "This lies instead with their know-how in wealth management, the stability of the Swiss legal system, an outstanding infrastructure and regulation which to date has been business-friendly," SBA said in a report on its website.