After many twists and turns, the story of Swiss accounts of Indian clients of HSBC Geneva has now entered the last lap. Since last week, the Swiss Federal Tax Administration (FTA) has started shooting letters to these customers, seeking their consent — an old ritual under the Swiss law — before revealing their account information to Indian authorities. 

At least four persons — including a diamond merchant, a wholesale trader, and people controlling mid-sized manufacturing companies — have till now received the Swiss FTA communiqué, a source aware of the development told ET. 

They will have to respond in ten days. The development has put these people in a Catch-22 situation. “The information would reach India sooner or later. If they give their consent, it would be an admission of their guilt of holding undisclosed funds in Swiss accounts. But, if they don’t, they would find it difficult to prepare their defence strategy as they would not know the nature of information which is shared with India,” said another person specialising in cases related to offshore accounts .

Once consent is given, the data would be immediately passed on to the Indian income tax department as well as shared with the customer. However, even information on customers who do not give consent would be disclosed after it is recorded in the Swiss official gazette. 

The policy to obtain customer consent owes its origin to a decision in 1713 when the Great Council of Geneva restricted banks from disclosing information of clients — a code that had transformed Switzerland into a fortress of secrecy. 

Indians who had sensed the brewing trouble early and were smart enough to close their accounts before April 1, 2011, may eventually escape the glare. “No Swiss bank will share information on accounts which have ceased to exist before the date the information sharing agreement between Switzerland and India came into effect,” said the source. 

Till now, most Indian account holders had put up the defence that the information based on which the tax authorities conducted raid on them, reopened assessment, and claimed tax on the ‘undisclosed income’ in HSBC accounts was stolen data, which reached India from France after a computer technician of HSBC Geneva had walked away with reams of confidential client information. 

That defence is now on a comparatively shaky ground. The letters from FTA are a consequence of the Swiss apex court decision that information can be shared as long as the stolen information matches with the real information. 

The private bank in Geneva came into the fold of HSBC after the British bank acquired a bank controlled by Edmond Safra, the Lebanese-born financier. The bank only dealt with those who could bring in at least half a million dollar — the minimum amount required to open an account. 

How would these Indian clients of HSBC respond now when the I-T department, armed with new, validated information confronts them? “Many cases are before the appellate body with assesses contesting the department’s stand. The department had initiated action as the cases would have become time-barred. 

In most cases, the I-T department did not find any incriminating document in the course of raid, but simply added the amount mentioned in the HSBC leaked document to reopen assessment. The account holders are likely to insist on their right to cross-examine the original source of the information. Some would say, they cannot be taxed as they never received any fund from trusts in which they are named as beneficiaries,” said a tax practitioner. 

“Also, if funds had been withdrawn or moved elsewhere before April 1, 2011 and the amount lying in an account post that date is significantly smaller, they would question the I-T department’s claim which may be based on the peak amount in the account,” said a person. 

However, if any new information is shared by Switzerland, the government may invoke the new harsh laws against black money and laundering to go the once prized clients of HSBC. 

 

 

Source: Economic Times

 

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