India and Switzerland on Monday signed the revised Double Taxation Avoidance Agreement, a move that will help the government seek details about illicit wealth allegedly stashed away by Indians in Swiss banks.
Finance Minister Pranab Mukherjee and Swiss Foreign Minister Micheline Calmy-Rey signed the revised pact in New Delhi.
"The revised Double Taxation Agreement contains provisions on the exchange of information in accordance with the OECD standard, which were negotiated in line with the parameters decided by the (Swiss) Federal Council," the Swiss Federal Department of Finance (FDF) said in a statement.
The issue of Indians having secret Swiss bank accounts is a political hot potato and was a poll plank during last year's general elections. Indians are alleged to have assets worth billions of dollars in banks in Switzerland.
Swiss banks' had said that exchange of information would be based on OECD (Organisation for Economic Cooperation and Development) norms. Paris-based OECD sets the international tax standards.
Switzerland is entering into revised tax pacts with many countries in accordance with OECD's Model Tax Convention, to facilitate the bilateral exchange of information related to bank account details of tax evaders.
Earlier in the day, when asked about the terms and reference in the revised tax treaty with Switzerland, Banashri Bose Harrison, who is the joint secretary (central europe) at the ministry of external affairs, said they were at par with other countries.
"(The revised treaty is) exactly at par . . . (with) what has been signed (by Switzerland) with other countries," Banashri Bose Harrison said.
According to FDF's statement, compared with the current taxation pact between India and Switzerland, 'It is now possible to come to an agreement with India on an automatic and extensive most favoured nation clause.'
In the case of dividends, interest, royalties and payments for technical services, the clause makes provision for the lowest withholding tax rate -- which India has with another OECD nation -- automatically applying to Switzerland, the statement noted.
Moreover, the revised treaty would ensure that in the future, shipping companies operating internationally would have to pay tax on their profits only in their country of domicile.
Currently, India has DTAAs with as many as 79 countries but all of them do not have provision for exchange of information related to taxation.