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Finance ministry denies fresh increase in Indian black money in Switzerland

The finance ministry rubbished reports that alleged that Indian money in Swiss banks had risen to over Rs 20,700 crore in 2020 from Rs 6,625 crore in 2019

The union finance ministry (Ministry of Finance) on 19 June said that increase in deposits of Indians in Swiss banks could be on account of an increase in business of Swiss bank branches located in India and raised Inter-bank transactions, rather than due to an increase in alleged black money held by Indians in Switzerland. It, however, said that Swiss authorities have been requested to provide the relevant facts along with their view on possible reasons for increase or decrease in deposits so that facts could be presented in the correct perspective.

Certain reports suggested that the funds of Indians in Swiss banks have risen to over Rs 20,700 crore (CHF 2.55 billion) at the end of 2020 from Rs 6,625 crore (CHF 899 million) at the end of 2019, reversing a two-year declining trend. It has also been stated that this is also the highest figure of deposits in the last 13 years.

“Reports allude to the fact that the figures reported are official figures reported by banks to Swiss National Bank (SNB) and do not indicate the quantum of much-debated alleged black money held by Indians in Switzerland. Further, these statistics do not include the money that Indians, NRIs or others might have in Swiss banks in the names of third-country entities,” the statement from the finance ministry read.

The statement said that the customer deposits have actually fallen from the end of 2019 in Swiss Banks. The funds held through fiduciaries has also more than halved from the end of 2019. The biggest increase is in “other amounts due from customers”. These are in form of , securities and various other financial instruments, the finance min statement said.

The finance ministry ascribed various other reasons for the increase in deposits. They do not possibly include an account of the increase of deposits in the Swiss banks out of undeclared incomes of Indian residents. It said that that increase in deposits may be on account of an increase in deposits owing to the business of Swiss banks’ branches located in India or an increase in interbank transactions between Swiss and Indian Banks. It could be due to a capital increase for a subsidiary of a Swiss Company in India or an increase in the liabilities connected with the outstanding derivative financial instruments.

The government has issued clarifications in wake of the widely held position that it has curbed generation of black money in the or unaccounted funds of Indians stashed abroad. The fresh tax agreements reached between India and certain perceived tax havens have introduced certain instruments to prevent round-tripping of funds and generation of black money.

India and Switzerland are signatories to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAAC) and both countries have also signed the Multilateral Competent Authority Agreement (MCAA) pursuant to which, the Automatic Exchange of Information (AEOI) is activated between the two countries for sharing of financial account information annually for the calendar year 2018 onwards.

Exchanges of financial account information in respect of residents of each country have taken place between both countries in 2019 as well as 2020. In view of the existing legal arrangement for the exchange of information of financial accounts (which has a significant deterrent effect on tax evasion through undisclosed assets abroad), there does not appear to be any significant possibility of the increase of deposits in the Swiss banks which is out of undeclared incomes of Indian residents, the finance ministry said.

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