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Tax officials stumble upon a list of names from another Swiss bank; unlikely to ‘nab’ all account holders-Sugata Ghosh
-The Economic Times

The last time the taxman went after those with Swiss bank accounts, many said they had no clue how their names cropped up; quite a few escaped saying that they were non-residents, some simply ignored the missives, and only a few broke down and confessed.

And there were the hard nuts who, without losing their equanimity, thought through the situation, invited their accountants and lawyers over for dinner, and arrived at that blissful conclusion that if they deny, and continue to deny, there was very little the income-tax department could eventually do. Will it be different this time?

The word is out that tax officials have once again stumbled upon a list of names from another Swiss bank. This time around, the list is longer: about 2,000 names compared to the 600-odd having accounts with HSBC Geneva.

The HSBC list was stolen data - leaked by a former employee of the British bank to French authorities who handed over the compact disc to Indian authorities.

The bank repeatedly said it knew nothing about the matter; only on a single occasion it indirectly admitted to the existence of such a list after a reporter of this newspaper was tipped off that a family member belonging to one of the bank's influential clients was named.

There were several media reports on how the income-tax department would embark on the task of recovering tax on such undisclosed income: one report said the government would hire informers, another talked about the possibility of the tax department going after Indian branches of foreign banks, while some said the department could initiate prosecution proceedings.

The reportage kept the story alive - it's one of those stories people love to believe - but tax officials could perhaps sense they had made little headway. Their exercise kicked off with letters to those in the HSBC list, asking them to come over to the department with copies of their passports.

But they knew that since the summons were based on stolen data, the tax claims could fail to impress Swiss authorities as well as Indian courts. Maybe it could be a little different this time if the tax department chooses to, and finally has, its way.

The source of the recent data is unclear - it could have originated from another leak (and, therefore, stolen) or it could have been fished out by informers (if there are any). But the department can handle it another way to make the best use of the possible information.

The treaty between India and Switzerland, which allows specific tax information exchange, has come into effect from January 1, 2012. However, it doesn't really allow Indian officials to freely ask for any information about anyone.

Under the exchange-of-information treaties, the countries are required to share information only if the other country has reasonable ground to believe that there has been a tax offence. They are not required to respond to general inquiries.

Now, if tax officials are convinced the list they have is genuine, they can pick the names and account numbers to approach the Swiss government.

After their HSBC experience, they are unlikely to make the mistake of telling the world that the list is a compilation of 'stolen' data. Instead, they may seek 'specific' information about a dozen individuals who are under some kind of 'investigation'.

Perhaps the Swiss will find it difficult not sharing any information if they are given the impression that the names have been gathered in the course of internal enquiries and probes carried by the Indian tax department.

But it will not be easy. Many of the accounts could well be regular accounts of trusts - with Indians and their NRI cousins as beneficiaries - formed under the RBI remittance scheme to buy properties. Besides, like the tax department, account holders too have become smarter. Some may have used offshore discretionary trusts that serve as shelters for tax evaders.

In discretionary trusts, the proportion of money to be shared with the beneficiaries is left to the discretion of the trustees and not spelt out in the trust deed.

Many have moved their money to Dubai, which is perceived as a convenient destination, or Singapore, where one of the largest Swiss banks has set up its international banking headquarters. It's tough to touch them as Swiss banks are not bound by the treaty to share any information on old accounts.

Some, of course, will be easy targets: say, a beneficiary of some offshore trust in a tax haven who has received money from the trust but never paid tax on it (unlike someone who never received money despite being a beneficiary); or the even more vulnerable types who are residents holding numbered Swiss accounts that were never disclosed.

The taxman has to independently establish that the money lying in an undisclosed account is part of the 'global income' of the individual in question while the latter may claim that it was earned while he was an NRI - something that the passport will reveal. It will be a season of summons, notices and lawyers.