Paving the way for the automatic exchange of tax information with other nations, Switzerland has ratified the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCAA).

The move will have an impact on trade-based financial crime, but its impact will be limited by the number of economies participating in what needs to be truly global exchange of data.

Implications

The Swiss move marks a very significant step in continuing global efforts to crackdown on illicit fund flows and curb banking secrecy practices.

Indian officials have already welcomed Switzerland’s ratification of the MCAA insofar as they have long been concerned about the trade in gold between the two countries providing cover for money laundering operations.

The Indian authorities believe that in this respect, the impact of an automatic exchange of tax information with Switzerland will have a beneficial impact on their endeavours to curb trade-based financial crime.

Limited impact

But the impact of Switzerland’s and other countries’ ratification of the MCAA is limited by several states – including Turkey, Malaysia, Morocco, Pakistan and the Philippines – that have so far not ratified the convention.

Developed by the OECD and the Council for Europe, the MCAA establishes a comprehensive multilateral framework for the exchange of information and assistance in tax collection. The MCAA will enter into force for Switzerland on 1 January 2017.