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Tax evasion Court authorises Indian tax request based on stolen data

Federal court in Lausanne

The Federal Court in Lausanne, Switzerland's highest appeals court.

(Keystone)

Switzerland’s highest court has upheld the right of the Federal Tax Administration (FTA) to cooperate with Indian authorities investigating tax evasion, even if the request is based on data stolen by whistle-blower Hervé Falciani.

The decision by the Federal Court in Lausanne rejected an appeal launched by two Indian citizens and two companies, who wanted to block information-sharing between Switzerland and India as part of a tax evasion investigation.

They claimed that the data upon which the Indian authorities were basing their cooperation request was stolen – by infamous HSBC whistle-blower Hervé Falciani – and that the request violated the principle of good faith.

Not so, said the judges; in general, as long as a country requesting cooperation did not buy the stolen data, there is no problem with using it as the basis for an investigation.

In this case, they said, the details surrounding the Falciani data remain opaque: the case against him (in which he was sentenced to five years’ imprisonment in absentia – see box) never established whether the French authorities purchased or simply received the data.

Besides, the information-sharing agreement between Switzerland and India does not oblige the country making a request to reveal how it came by the data at the root of the demand.

The decision thus validates that made last year by the Federal Administrative Court in St Gallen authorising the FTA to move ahead with the cooperation request.

Hervé Falciani

The case marks the latest turn in the story, which began in 2006 when Hervé Falciani, an IT employee of the HSBC bank in Geneva, absconded with stashes of sensitive client data.

After several unsuccessful attempts to sell the data in Lebanon, Falciani gave it to French authorities, where it acquired the moniker “Lagarde list” after the then-finance minister. The French authorities used the data to chase down thousands of tax dodgers.

Following increased international interest in the number of companies and individuals holding offshore accounts in Switzerland, the Swiss authorities were forced to adapt several laws on secrecy and the sharing of information.

Battling a reputation for opaque regulations, it received a “largely compliant” rating in a 2016 Organisation for Economic Co-operation and Development (OECD) tax evaluation, which stated that “Switzerland’s approach to exchange of information for tax purposes has changed significantly over the past three years”.

In 2016, Falciani was sentenced in absentia by a Swiss court to a five-year jail term, but he continues to live in France where he is protected from extradition by his French citizenship.

end of infobox

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