The FT reports that HM Revenue & Customs has finally concluded a Tax Information Exchange Agreement with Liechtenstein, except it’s a deal like none before.

Negotiated personally by Dave Hartnett, Permanent Secretary of HM Revenue & Customs, and a man for who I have a high regard, this deal moves the goalposts on information exchange. As the FT notes:

About 5,000 British investors with an estimated £2bn to £3bn in secret Liechtenstein bank accounts will be asked to come clean under a ground-breaking deal to be signed on Tuesday.

The deal is unusual because Liechtenstein banks will be asked to close the accounts of customers who do not voluntarily disclose the existence of their accounts to HM Revenue & Customs and an audit will be undertaken to check that they have done so. This is the novelty of the deal: Liechtenstein is not just signing a Tax Information Exchange Agreement which it knows will have little impact. In this case it has to take action and rid the place of British tax evaders. that is completely new ground, and to be warmly welcomed.

The customers in the meantime get a generous variation on the current voluntary disclosure rules for overseas account holders wishing to declare past evasion.

As the FT again notes:

Although the Liechtenstein investors would in principle be free to move their money without telling the UK tax authority, they would risk triggering a disclosure under anti-money laundering rules.

and

The deal between Liechtenstein and the UK will accompany an agreement to exchange tax information on request. But by itself this would probably have a modest impact on tax evaders because the UK tax authority could request information only if it had good grounds for suspicion.

This shows that the awareness in the press of the criticism we are making of Tax Information Exchange Agreements is growing: they do not work by themselves. The UK has opened up a new front that has much to commend it.

But at the end of the day it is automatic information exchange that we need, and I’ll venture to suggest that the proposal I have made on how to achieve this is the most realistic on the table right now.

In the meantime — the funds this will produce have to welcome. On £2 - £3 billion over ten years or so expect £600 million or more in tax. That’s serious money recovered. It’s just a shame that an implicit guarantee of non-prosecution appears to have been given. But at least HM Revenue & Customs have the power to name those who settle now, which is very good news and should feed a useful media frenzy.