Pressed hard for giving access to details of money stashed away by Indians and
other overseas clients with them, Swiss banks have offered to tax this wealth
on behalf of the respective foreign governments.
India, where there have been long-running demands for concrete actions to
bring back the black money lying in highly secretive Swiss banks, will begin
talks in December for a new tax treaty with Switzerland so that it could get
details about the defaulters.
Besides India, a number of other countries are also said to be looking at
similar treaties, while the US recently reached an agreement for giving access
to close to 4,450 bank accounts of Americans with Swiss banking major UBS.
As
an alternative to the information exchange, Swiss banks have mooted the idea
of a ‘universal withholding tax’ — wherein they would tax the earnings
generated from the wealth of foreigners deposited with them and transfer the
proceeds to the government of the concerned country — and is currently
discussing the same with the relevant authorities.
Out of this, about 694 billion Swiss francs (over Rs.30,00,000 crore) were
held by foreign private clients.
The Swiss banks have offered to charge tax directly at source on behalf of the
foreign country with which a taxation agreement is in place. The revenue would
be forwarded to the Swiss Federal Tax Administration for passing on to the
client’s country of domicile. However, the concerned client’s identity would
not be revealed.
Under this system, the foreign country would have a guarantee that all
investment income — and not just a small portion as at present — received by
their taxpayers via a Swiss paying agent would be subject to taxation.
The new tax would be of a final nature in legal terms; in other words it would
constitute a definitive tax assessment. After the bank in Switzerland has
deducted the tax, the bank client would — from the perspective of his home tax
authorities — automatically have fulfilled his tax obligations with regard to
this income”.
Another advantage would be that foreign countries could be offered the same
tax treatment for those of their citizens with bank accounts in Switzerland.
Apart from charging withholding tax, the proposed model would also levy a
retention tax on dividends, income from collective investments and capital
gains.
A
domestic withholding tax system is already in place in Switzerland for many
decades, whereby 35% of the annual interest paid on a savings account in a
Swiss bank is with held and forwarded to the Swiss tax authorities.
The tax is applicable to anyone receiving interest or dividends from a
Swiss-domiciled source, irrespective of their own domicile.
(Source :
Business Standard, 27-9-2009)
