India and Switzerland on Thursday discussed ways to deepen cooperation in the detection of black money and combating tax evasion—a key priority of Prime Minister Narendra Modi’s administration.
Switzerland sought a new bilateral investment treaty (BIT) with India to protect investments from Switzerland after New Delhi terminated all existing pacts with partner countries in March.
The visiting President of the Swiss Confederation, Doris Leuthard said on Thursday that discussions for a new pact with India were underway.
Leuthard arrived in New Delhi late Wednesday on a three-day visit, her first as the President of the Swiss Confederation. Swiss presidents have visited India on three earlier occasions—in 1998, 2003 and 2007.
Following talks between the Indian and Swiss delegations, Modi noted that ensuring transparency in financial transactions was a concern of governments across the world.
“Be it black money, dirty money, hawala transaction (secret offshore transfer of funds) or money related to arms and drugs, our cooperation with Switzerland continues to deal with the global curse,” Modi said.
He recalled that during his visit to Switzerland last year, the two countries had signed an accord for the automatic exchange of information on tax issues. Under the terms of the pact, Switzerland will begin sharing information with India on tax issues once the country completes its internal procedures, Modi said.
In June, Switzerland ratified the automatic exchange of financial account information with India and 40 other jurisdictions to facilitate immediate sharing of details about suspected black money even as it sought strict adherence to confidentiality and data security.
Adopting the dispatch on introduction of the AEOI, a global convention for automatic information exchange on tax matters, the Swiss Federal Council had said the implementation is planned for 2018 and the first set of data should be exchanged in 2019—something that Leuthard reiterated on Thursday.
“We hope by end of this year, this (law on automatic exchange of information) will be passed and be operational by 2019 when the first exchange can take place,” she said.
“Switzerland is and will be an important financial place. We have all the interest to be transparent, cooperative and a good reliable partner. Without financial services, we cannot have investments and a business community that is active,” the Swiss President said.
The issue of black money has been a matter of big debate in India and Switzerland has for long been perceived as a safe haven for the illicit wealth allegedly stashed abroad by Indians. Modi took office in 2014, vowing to fight corruption and bring back billions of dollars stashed away overseas as well as in real estate, stock markets and front companies. The surprise ban of high-denomination currency notes announced by Modi on 8 November last year was seen as a move to fight corruption and stashing away of illicit wealth.
On her part, Leuthard noted that Switzerland was the eleventh largest investor in India.
“It is important that we again have in place an investment protection agreement. We have negotiations underway because we think that this would also be an element for further cooperation, further investment from Swiss companies to India,” Leuthard said. European nations are among the scores of countries that have seen bilateral investment treaties lapse without any new ones in place. India wants to sign investment pacts bilaterally with individual European Union (EU) member countries based on its model BIT though the EU is opposed to the idea.
India brought out a new model BIT in December 2015, intending to replace its existing Bilateral Investment Promotion and Protection Agreements (BIPAs) and future investment treaties, after being dragged into international arbitration by foreign investors who sued for discrimination citing commitments made by India to other countries in bilateral treaties.The model BIT approved by the cabinet excludes matters relating to taxation. Controversial clauses such as most favoured nation (MFN) have been dropped while the scope of national treatment, and fair and equitable treatment clauses, has been considerably narrowed down.
The two countries also signed two preliminary pacts for cooperation in the railways sector on Thursday.
Under the first, the Swiss Confederation will provide cooperation in various areas including traction rolling stock, railway electrification equipment, station modernization and multimodal transport.
As per the terms of the second, signed between the Konkan Railway Corporation Limited (KRCL) and Swiss Federal Institute of Technology, Zurich, the latter will help in establishing the George Fernandes Institute of Tunnel Technology (GFITT) at Goa.