Breaking the code

The signing of an international treaty on mutual administrative assistance in tax matters by Switzerland may mark the end of the rigid code of secrecy that has surrounded the operations of Swiss banks.

The convention was signed this week under the auspices of the Organisation for Economic Co-operation and Development (OECD) which has campaigned for international action against tax evasion and concealment of illicit funds. Swiss banks have been a byword for banking secrecy as they have religiously protected the anonymity of their customers. This has made the country one of the biggest tax havens in the world, where unaccounted and tainted money was parked without the fear of questions and consequences. Switzerland is the 58th country to sign the convention, to which India is also a party.

It is after much international pressure that the Swiss authorities have agreed to extend co-operation to other governments which seek information on the numbered accounts in its banks. These pressures had intensified after the 2008 global financial crisis but the country has been resisting them. Countries like the US had managed to extract information in special cases on threat of penal or retaliatory action but others with less clout always hit the wall. Information will now have to be provided to all signatory countries if a valid request for it is made to the Swiss authorities. Since a good part of the secret money that gets deposited in Swiss banks is considered to originate from corruption or criminal activities, the easing of the secrecy norm would strengthen the fight against such illegal actions and practices. It will also make international financial flows  more transparent.

A lot of Indian money is also thought to have been stashed away in Swiss bank accounts, though estimates have widely varied. The Indian government has claimed that the secrecy laws have prevented it from getting information on the illicit holdings and the persons behind them. The signing of the treaty by the Swiss government gives India an opportunity to pursue these charges and repatriate the money.  However,  the record of the government in taking action even in cases where specific information was available does not inspire confidence.  It will take some time for the Swiss government to get the treaty ratified by parliament and then frame the rules and procedures to give effect to it. Once this is done the excuse of  unhelpful Swiss laws and non-cooperation by the Swiss government will not be available.