Despite the government toughening its stand on disclosure of the names of 26 Indians with “black accounts” in Liechetenstein’s LGT Bank made known to New Delhi by Germany, the focus of Thursday’s hearing in the Supreme Court is likely to be on how the United States managed to get data about its 4,500 citizens’ secret accounts from Switzerland and why India should not follow the same route.
Senior counsel Anil Diwan, appearing for Ram Jethmalani and some other prominent citizens who had filed a PIL seeking disclosure of the names of Indians with black accounts abroad and bringing unaccounted money back, had at the last hearing begun referring to the US success story when the case was adjourned for further hearing on Thursday.
The US justice department and its Internal Revenue Service had in June 2010 got Swiss legislators to approve the handing over of data relating to 4,450 Americans’ “secret accounts” in Switzerland’s largest bank UBS after several rounds of intense negotiations on an issue considered by both sides to be “very complex”.
After top IRS officials managed to convince the Swiss authorities that Americans holding UBS accounts had violated various US laws in stashing money in tax havens, the Swiss Parliament approved disclosure of the names.
The IRS estimated that the total unaccounted deposits of US citizens at UBS alone exceeded $18 billion. The US tax agency was so elated with its success in Switzerland that it described it as a “watershed movement”.
With parliamentary approval, the Swiss tax authorities issued a formal public statement saying there was no legal hurdle left on transfer of data by UBS on 4,450 Americans’ accounts taken up by the IRS in the first instalment. The IRS estimated that the total number of American accounts at UBS was nearly 7,000.
The agreement between the two countries has taken care of any further legal hurdle if the account holders challenging the transfer of data in any civil court in Switzerland. In such an eventuality, the account holder would have to bring on record his name to file the case, which would automatically make his identity known.
The other noteworthy factor of the deal was that UBS would provide information to IRS officials on all US citizens who had deposits of $1 million or more in secret accounts.
One estimate by the association of Swiss banks is that of the $7 trillion stashed by “black account” holders in various Swiss banks, Indians account for around $1.4 trillion to $1.8 trillion.
After its success with UBS, the US tax authorities are taking up with the Swiss government the matter of Americans’ accounts in other banks. The IRS has also initiated parallel negotiations with the authorities in Hong Kong and Singapore, two other major havens.
The success of the US strategy, drawn in the backdrop of the unprecedented 2008-09 recession, can be gauged from the fact that nearly 14,700 rich Americans have volunteered to furnish details of their offshore secret accounts after finding no escape route left.