The Swiss authorities, already annoyed by India's new black money law that puts pressure on its banking system, has now rejected an Indian government request for legal assistance to proceed against a Swiss firm for alleged bribery.
A report by the NZZ am Sonntag newspaper said Switzerland's office of the attorney general (OAG) did not deliver information requested by international assistance law saying it was by law not in a position to provide information.
This comes after banks in Switzerland and some other safe haven European countries started asking their Indian clients to disclose their accounts to the Indian tax authorities before making a deposit.
Switzerland rejected India's request for legal assistance in investigating two Swiss companies suspected of bribing Indian officials to win arms deals after the CBI unearthed a $5 million bribe by Switzerland-based defence company Rheinmetall to Abhishek Verma in connection with Rheinmetall Air Defence (RAD) deal.
CBI, which arrested Verma and his wife Anca Neacsu earlier this month, had found that Rheinmetall Air Defence (RAD) had transferred $530,000 to Verma's account, which was 10 per cent of the bribe of $5 million, along with interest.
The amount was transferred to the US escrow account of Ganton, on 17 February 2011, it was reported.
Swiss banks, meanwhile, asked its Indian clients to come clean on the tax issues after the Indian tax authorities extended a three-month compliance window for disclosure of all undeclared foreign assets, to save themselves from being prosecuted for 'abetting' the hoarding of untaxed assets.
Besides, several Swiss banks as well as other European banks have started asking their Indian clients to disclose their accounts to the tax authorities back home as they fear being accused of 'abetting' the hoarding of untaxed assets.
The new law provides a three-month compliance window for disclosure of all undeclared foreign assets till next month, for which they would need to pay 30 per cent tax and 30 per cent penalty and escape further action.
This means a 60-per cent reduction in the deposit amounts.
After the window expires, anyone with undisclosed foreign assets would have to pay 30 per cent tax and 90 per cent penalty and they would also be liable for jail term of up to 10 years.
The law also provides for 'punishment for abetment'.
These banks, which include those headquartered in Switzerland and London, are asking their customers from India, including NRIs, to avail of the 'one-time compliance' window provided by the Indian tax authorities for disclosure of undeclared foreign assets.
Besides, these banks are also asking their clients to give fresh undertakings to state that they are 'in compliance' with all the laws in their home countries, executives at some of these large financial institutions said.
Indian authorities are already pursuing cases related to unaccounted funds Indians have kept in HSBC's Geneva branch, after receiving a list of names from the French government few years back.
Indian authorities have been asked to show cause why action should not be initiated against it in case of non-cooperation with regard to "suspected tax evaders and offenders of tax crimes".
Coming at a time when Switzerland also offered to move towards automatic exchange of tax information with various jurisdictions, including India, the black money law has come as a double whammy for the Swiss authorities.