Facts:
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Money parked by Indians in Swiss Banks have nearly halved to about Rs 4,500 crore in 2016.
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The funds reported in 2016 is the lowest amount of funds possessed by Indians in the Swiss banks ever since 1987 and marks the third straight year of decline.
Context:
Switzerland has ratified automatic exchange of financial account information with India and 40 other countries. This will facilitate Switzerland to share information about suspected black money with India and other 40 nations.
Why this is important?
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Switzerland has long been perceived as one of the safest havens for black money stashed abroad by Indians.
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The participation of Switzerland which is the world’s largest home for overseas wealth in the information sharing agreement would be a major boost in ending tax avoidance.
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As a step towards fighting black money stashed abroad, ‘Joint Declaration‘ for implementation of Automatic Exchange of Information (AEOI) was signed between India and Switzerland on November 2016.
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Switzerland agreed for the introduction of the AEOI (Automatic Exchange of information) on tax matters under the guidance of G20, OECD and other global organisations.
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Switzerland has said the AEOI will be implemented based on the Multilateral Competent Authority Agreement (MCAA) on the Automatic Exchange of Financial Account Information (AEOI).
What is Automatic Exchange of Information (AEOI)?
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AEOI will facilitate exchange of information among signatories.
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It is based upon Common Reporting Standards under the guidance of G20, OECD etc.
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When implemented fully, it would put in place a system wherein bulk taxpayer information will be sent periodically from the source country of income to the country of residence of taxpayer.
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It would enable India to get access to information virtually from almost all the countries in the world including offshore financial centres.
What is Multilateral Competent Authority Agreement (MCAA)?
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The MCAA is based on the international standard for the exchange of information developed by the OECD.
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India, on its part has promised to safeguard the confidentiality of the data received.
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India joined the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information on 3rd June, 2015.
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According to the OECD, MCAA is a multilateral framework agreement that provides a standardised and efficient mechanism to facilitate the automatic exchange of information and avoids the need for the conclusion of several bilateral agreements.
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