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.
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If I were playing these games I would at least have a double layer of secrecy between me and my money. I would guess that most assets held in Swiss banks would be in the name of an entity in another secrecy jurisdiction.
But I agree that caving in formally with an agreement like the Swiss/UK is not the right answer to that problem.
This is a DISGRACE.
Ah well, back to chasing benefit cheats. If we catch all of them we might even save 1% of the money so carelessly tossed away by this disgraceful decision.
But, then, taxing the rich is the “politics of envy” and “class war”…
It is now getting ridiculous! How the hell do the Swiss know the owner of bearer shares of a Cayman, Isle of Man, Panama etc company having an account with a Swiss Bank? How the hell do the Swiss know the beneficiaries of a Trust in the Cayman Islands, Mauritius, Guernsey even though the trust holds accounts with a Swiss Bank? The Cayman/BVI etc trust deed is not provided to a Swiss Bank! The changes of beneficiaries has not be reported to the Bank which manages the investment portfolio etc. How the hell does a Bank know who is the beneficial owner if a Swiss lawyer represents his clients (form A) in banking matters? Is the lawyer going to break his attorney-client prvilege!
What the Swiss propose only works in theory but it does not work in the real world even the clients are ethical and moral. The Swiss should know better!
It would be interesting to see how much tax the UK actually manages to collect from this arrangement. I suspect very little. Will they publish the figures after a year has passed? Probably not. Anyone with half a brain will manage to deal with this little withholding tax problem one way or another. I’m beginning to wonder whether the UK really has the will to tackle this kind of evasion.
It is all about a hidden agenda! The hidden agenda is here “Let´s deduct withholding taxes” and if we do not know to which country (see my first comment today) Switzerland has to pay tax to Switzerland keeps the withholding tax in its own pocket (Federal income). This has happened since decades and as a matter of fact income for Swiss Government in respect of not claimed withholding taxes has been substantial the last few decades!
This all relates to the income from bank accounts in Switzerland. The asset itself is not mentioned. The original assete is the key. If that was a source of revenue itself, not reported to UK, then surely this will still be subject to enquiry by HMRC.
@Michael Hardy
The deal is not retrospective and the right to enquire is to be restricted
So the right to enquire about evasion has been voluntarily foregone
That’s the reality of this
Just one more piece of evidence that this government has no real intention of tackling tax evasion. I’m afraid that’s the reality.
@RogerM
I think it shows that the German and UK governments are totally committed to finding pragmatic solutions to the problem of tax evasion.
Maybe it is time to pause and remember that under that the status quo the UK is getting absolutely nothing from these accounts, and that in the absence of this agreement there is no chance of it ever changing.
I don’t know about about you about you, but I would rather have £1 billion today than nothing ever.
@Million Dollar Babe
No let’s be blunt – these are fundamentalist governments seeking to support tax abuse and undermine EU initiatives in the process
Don’t pretend otherwise – in the case of the UK these people instinctively support tax havens – and that’s a travesty of justice and ethics
@Richard Murphy
The Merkel administration was the first to use stolen client data as the basis for prosecution, and sent high profile business figures to jail as a result. It is difficult to call it supportive of tax abuse, don’t you think?
As for the UK, it is simply pragmatic: one or more billion a year starting today is better than nothing in our lifetime and that of our children and grandchildren.
As for the EU, please remember that there is no consensus on this issue. Luxembourg and Austria will veto any attempt to attack their banking secrecy. So there is little that the UK and German actions can undermine.
It is not a great deal. It is a compromise but we should be able to live with it.
@Rudolf Elmer
Now that is interesting!
So the default is that when the country that is supposed to receive the withholding tax cannot be identified – then Switzerland gets to keep it.
It would also be interesting to see how that amount will compare with the one billion that Mr Gauke hopes to get out of it. But I don’t suppose we ever will – in view of the secrecy.
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