Unless you’ve been living under a rock, you’ve probably heard of Swiss Banks before. There is always an aura of secrecy associated with Swiss Banks’ accounts. Swiss Banks are known for their anonymity, safety, and tax haven status.
Recently, the funds of Indian individuals and firms jumped to CHF 2.55 billion (₹ 20,700 Crore) in 2020 from CHF 899 million (₹ 6,625 Crore) in 2019. This is a reversal of a two-year declining trend and has taken the figure of deposits to the highest level in 13 years when they stood at a record CHF 6.5 billion (₹ 52,600 Crore) in 2006.
Note – Currency conversion rates are as of the year that reports talk about.
Breakdown Of The Indian Funds Stored In Swiss Banks?
As per the data, in 2020, the money held via other banks rose sharply by CHF 88 million from the previous year figures to become CHF 383 million.
The most significant surge was in “other amounts due to customers” from India, which rose by six times, from CHF 253 million to CHF 1,664.8 million.
Interestingly, funds classified as fiduciaries or trusts declined to CHF 2 million.
The data released doesn’t include the money that Indians might have in Swiss banks in names of third-country entities.
Note – Currency conversion rates are as of August 2020.
Is This The Black Money Stored Outside Borders?
Swiss authorities have argued that assets held by Indian residents in Switzerland cannot be considered as “black money.” Still, Swiss Banks and Indian funds held in them have always been a hot topic in the Indian political landscape.
The “Liberalized Remittance Scheme (LRS)” of RBI allows Indian residents to send $250,000 overseas for various purposes like education, employment, emigration, medical treatment, and investment. This scheme permits money transfers to anywhere globally except non-cooperative countries, as declared by Financial Action Task Force (FATF).
India and Switzerland had signed the “Automatic Information-Sharing Agreement” after protracted negotiations, and it entered into effect from January 1st, 2018. Before this agreement, Switzerland insisted on protecting account holder’s identity and tax-related information.
Since September 2019, the Swiss Banks have started sharing information with Indian tax authorities of the financial assets of Indians stashed in Swiss Banks which can help find economic offenders.
This “Automatic Exchange of Information” is an established global standard developed by the Organization of Economic Cooperation and Development (OECD). This step promoted the transfer and exchange of financial information among countries, and it put an end to the era of banking secrecy.
Why Are Swiss Banks Still A Favourable Entity To Store Money In Despite Automatic Information-Sharing Agreements Taking Place?
Switzerland is considered a safe place to keep money in because its economy is steady, and the government maintains neutrality in global conflicts. It also gets easier because Swiss Banks open accounts in most of the major currencies, which helps account holders in managing financial risk and transactions.
Furthermore, low tax rates encourage the wealthy to invest and save their money in Swiss Banks, making it easier for them to relocate and settle in a safe and stable country in the event of an unexpected conflict.
Hence, if we were to go by the above presented facts, this money does not indicate the quantum of the black money held by Indians in Switzerland.
Editing Credits - Sarthak Gupta
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