Swiss process on for amending tax pacts to comply with global norms

BERN/NEW DELHI: To comply with global norms, Switzerland today began consultation process for unilaterally amending bilateral tax treaties to allow exchange of information when there is a request from another country.

Amid rising international pressure, including from India, Switzerland has been taking steps to share tax information as well as dispel perception that the country is a safe haven to stash away unaccounted wealth.

The Swiss Federal Council has started the consultation procedure, which would go on till February 5 next year, to bring in the provision of exchange of information on request in bilateral tax treaties.

The proposed law would allow “Switzerland to swiftly amend its double taxation agreements which do not yet comply with the international standard for exchange of information upon request”, the Swiss government said today.

This step is part of efforts to make Switzerland a “competitive and tax-compliant financial centre in line with the international standard”.

However, the unilateral application of the new provision would be subject to principles of reciprocity and confidentiality of the exchanged information. Besides, the proposed mechanism would be a transitional measure.

Last week, Switzerland had agreed to share with India information on Indians having illicit money in Swiss banks on providing independent evidence in each case to the Alpine nation.

Switzerland has already revised majority of its double taxation agreements (DTAs) network and has inked seven tax information exchange agreements.

“Although 38 of these revised DTAs are in force, a certain number are not yet in compliance with the OECD standard to which the new law would apply.

“If it were to enter into force today, 69 states or territories would be affected. This number should be lower, however, by the time the law enters into force,” Swiss government said in a statement.

With regard to the tax treaty amendment, Swiss Federal Council has started the consultation procedure on the Federal Act on the Unilateral Application of the OECD Standard on the Exchange of Information (GASI).

Paris-based Organisation for Economic Cooperation and Development (OECD) sets global tax standards.

The Swiss government said that unilateral application would happen in compliance with the principles of reciprocity and confidentiality of the exchanged information.

“In concrete terms, this means that Switzerland will continue to refrain from responding to a request if the requesting state is not in a position to respond to requests from Switzerland in line with the OECD standard and is unable to comply with the data protection rules and the principle of speciality,” the statement said.

Switzerland also noted that the mechanism would be a transitional measure.

“As soon as states or territories can exchange information upon request with Switzerland on the basis of a DTA in conformity with the standard or another international agreement, the GASI will no longer be applicable to the states or territories concerned.

“It will be repealed as soon as all of the states and territories concerned are covered by an agreement which makes provision for the international standard recognised by the OECD,” it added.

The bill for the GASI is part of the Federal Council’s efforts undertaken so far to implement the Global Forum’s recommendation to create a dense network of information exchange agreements.

Amongst other things, these efforts include the bilateral re-negotiation of existing DTAs and the conclusion of new DTAs and tax information exchange agreements (TIEAs), as well as the signing of the multilateral OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters on October 15, 2013,” the statement said.