I wrote yesterday about the Swiss / UK tax deal that was signed by the ConDems yesterday. I said:
A person will under this new arrangement suffer an as yet not agreed rate of income tax deduction in Switzerland (35% is mooted, but I bet it won’t be that high) and then they will have no obligation to a) report this income in the UK and b) pay any additional higher rate tax in the UK.
One commentator wrote:
Of course, your talk of an amnesty is a figment of your imagination. All it says that British residents should not be deterred from holding accounts in Switzerland, but they are still obliged to declare the income to the UK authorities.
I think they are wrong, and I am right. I am relying on this comment in the Swiss press release:
Future investment income should be covered by a withholding tax, the rate of which has yet to be negotiated. The final withholding tax is a tax at source. After it has been paid the tax obligation towards the country of domicile will have been fulfilled.
I am sure that press release will have been agreed with the UK. And read it carefully: once the Swiss withholding tax has been paid the tax obligation to the country of domicile will have been fulfilled. So, no further tax can be due. But given that the whole purpose of the agreement is to ensure that Swiss banking secrecy need not be violated that must also mean that there can also be no obligation to put income covered by this arrangement on a UK tax return.
In other words, and for the avoidance of doubt, as I said:
if true then the UK has just done the following:
1) Granted Switzerland the right to set the effective higher rate of tax on investment income in the UK;
2) Granted Swiss banks an everlasting competitive advantage over UK banks – because it will pay all higher rate tax payers to bank in Switzerland henceforth;
3) Denied the UK tax authority the right to make enquiries of their own choosing about the tax affairs of a British person – the Swiss now being granted the right to decide how many enquiries may be made and whether they are appropriate or not.
4) Granted criminal immunity to Swiss bakers who sell tax evasion – so allowing them to commit ongoing crime in the UK.
We have in effect passed the right to control our taxes to the Swiss. I cannot at present see another interpretation of what has been written. The entire context requires that I be right.
And for the Conservatives – the party that has always been sceptical about passing powers to Europe - to instead pass control of UK taxation to the Swiss is quite extraordinary. But unless they and the Swiss fundamentally disagree on what this deal means that is what they really have done.
And I’ve had to blog it again, because it is quite so hard to believe.