G20 deal on sharing bank information will help tracking black money

The G20 has decided to put in place a mechanism for automatic exchange of tax information between various countries by 2017. G20 Finance Ministers and Central Bank Governors met in Cairns, Australia. The new global standard, as formulated by Paris-based Organisation for Economic Cooperation and Development (OECD) in July, would be common for all countries.

It would facilitate a "systematic and periodic transmission of bulk taxpayer information by the source country of income to the country of residence of the taxpayer concerning various categories of income or asset information"

To enable automatic exchange of information on an annual basis, the financial institutions, including banks, brokers and fund houses, would have to mandatorily collect necessary details from their clients and submit the same to their respective regulators.

However, such an exchange of information would also have a confidentiality clause and safeguards, while countries would need to pass domestic laws as per their respective legal jurisdictions to enable such a cooperation.

The standard, once implemented, would allow governments to obtain detailed account information from their financial institutions and exchange the same automatically with other jurisdictions on an annual basis.

The development assumes significance in case of India, as it has been facing difficulties in getting information on cases of suspected tax evasion from other countries, specially Switzerland, which has maintained that such details can not be shared without specific proof of financial irregularities by the concerned Indian client of Swiss banks.

46 countries, including India, have already agreed for a common timeline to exchange information automatically from 2017