Ministers should urgently rethink plans for a deal with Switzerland which would see UK tax evaders let off lightly while harming poor countries, says Christian Aid.
‘We fear that the agreement will be soft on the Britons who have illegally hidden billions in the Alpine tax haven but hard on developing countries, which also suffer from Swiss banking secrecy,' said Christian Aid Director Loretta Minghella.
‘In a week when there has been a lot of talk in the UK - following the riots - of a moral deficit in society, it is extraordinary that the UK Government appears poised to let tax evaders off with nothing more than a regular tax bill.
‘People who have hidden money in secret Swiss bank accounts in order to evade their legal responsibilities to the UK will be able to escape unpunished and they won't even have to reveal their identities to the UK taxman.'
The proposed agreement will lead to Britons with secret Swiss bank accounts starting to pay tax on them, which the Swiss will pass on to the UK — but crucially, without revealing those people's identities.
Christian Aid believes the deal will seriously damage global efforts to curb tax dodging — a menace which it estimates costs poor countries $160 billion a year, far more than they receive in aid.
Germany is also reported to have initialed a similar deal with Switzerland.
Poor countries lack the political and economic clout to do such deals with Switzerland - but they too lose billions as a result of money being illegally hidden in tax havens.
And just like the UK, they need that money to fund vital public services such as schools, hospitals and justice systems.
Ms Minghella added: ‘I urge UK ministers to reconsider the Swiss tax deal as a matter of urgency.'
Christian Aid is calling on the UK and other G20 Governments to use their November summit meeting in Cannes to bring about an end to the tax haven secrecy exemplified by Switzerland.
Specifically, the G20 should broker a new system of automatic information exchange between Governments — including those of poor countries — to help them to detect when citizens hide wealth offshore.
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Richard, might I ask an unrelated question?
What do you think of the BBC’s current financial coverage? Do you think it is extensive, honesty, penetrating? Is it reflective of the real turmoil and double-dealing taking place in the City of London, or is it supine and obfuscatory? I as as I was stunned to find that the BBC had dedicated part of its website to asking which ‘cuts’ people felt the government should make; and this in spite of the fact that the banks had been handed trillions of pounds of taxpayers money? No mention was made of the fact that the private debt of the the banking sector was transferred to the public’s balance sheet – nor was there any mention that this private debt crisis, because it was shirted onto the public balance sheet, helped to trigger a fiscal and thence sovereign debt crisis! Do you think we are seeing honest reporting of events? If not, how do you think we can go about solving this problem?
Thanks,
Jonah.
I am certain that the best way to deal with tax avoidance and evasion that is realized via tax havens is for developping and developing countries that produce wealth to form a common front towards the havens.
The Swiss bilateral deal making is an deliberate effort to ensure that a common front is not formed. So I agree with Christian Aid and your blogging on this topic. However, I don’t think that the UK can be counted on to do the right thing unless civil society groups like Christian Aid and the influence of your blog and others can convince the UK government that it could make a niche for itself, and thereby generate some global authority, as a country that has a moral compass and follows it. The alternative would seem to be for the UK to be a country that is essentially a financial centre that has a few extra people and a whole lot of social problems.
is for developping and developED
Our Ministers cannot do much more without invading Switzerland and overthrowing its constitution. Changes in the Swiss bank secrecy law would, constitutionally, require a positive vote in a national referendum.
We can do what we like to Switzerland – including economic blockading, withholding tax on all payments in and much more
Our acquiescence is choice, and nothing more
Of course we can stop this
An unilateral economic blockade of Switzerland? We don’t even have a common border. We account for about 5% of Switzerland’s foreign trade.
Of course we could bar Swissair from Heathrow – except that Swissair went bust years ago.
We could demand the BIS move to Frankfurt, and that all the UN organisations relocate to Stockholm – and the world would laugh at us.
Oh for heaven’s sake – haven’t you heard of the EU and its dislike of tax havens?
“haven’t you heard of the EU and its dislike of tax havens?”
Germany, the EU’s dominant economy, two and half times the size of the UK and Switzerland’s largest trading partner has just signed exactly the same deal with Switzerland. Also, the EU cannot even agree the terms of cross-border between its own member, as demonstrated by the now obvious failure of the EUSD revision. How do you expect it to agree on action with non-member states.
Deal has not been approved by German parliament yet – and may well not be
Not the same thing at all
(@ Darren) Lest there be a conflation between automatic withholding and anonymous remittance – the choice of Switzerland and until the end of 2010 Luxembourg and Austria as well – and information exchange I write to say: industrialised countries tend to prefer the latter while secrecy jurisdictions push for the former. (Indeed, Switzerland has had a domestic system of automatic withholding since before the 1960s.)
I had thought that the EU as a whole had embraced the information exchange option and that – the success or failure of the EUSD notwithstanding – its directive of 15 February 2011, which includes a provision for _automatic_ exchange of information within the EU, represented a significant advance in this regard. (REF: Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC. Section II Mandatory automatic exchange of information, 2011 O.J. (L64) 1 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:064:0001:0012:EN:PDF)
Sandra, there is no difference between industrialized nations and secrecy jurisdictions (whatever that means). The difference is between countries that value and have concern for privacy as an elementary right and those who do not. In the United States, the world’s most advanced nation, privacy is covered and protected by the Bill of Rights, with the a number of “open-ended” amendments such as #9.
Going back to the EU, there is no agreement as a whole for automatic exchange. The directive you mention only covers a maximum 5 of categories of income starting in 2015 (salaries, pensions, certain life insurance products, real estate and directors’ fees). Post-2017 the Commission may propose 3 additional categories (dividends, capital gains and royalties), but this will be subject to unanimous acceptance by the member states. The directive has been specifically drafted to leave out, and not affect income from savings (i.e. interest). After the directive was adopted by heads of state (in December last year), Luc Frieden clearly stated that the directive, combined with a permanent withholding regime for savings income as part of the EUSD revision, was the position that Luxembourg would stick to. The Austrian government took the same position some time later.
Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
Secrecy jurisdiction seek to undermine privacy
Austria and Luxembourg are secrecy jurisdictions
(@John 77): Switzerland needs good economic and diplomatic relations with the EU including the UK. Beyond its general interest in this regard, it wants access to the UK’s lucrative ‘high net worth’ (or ‘wealth management’) market. It is for this reason that it is seeking to negotiate an automatic withholding and anonymous remittance agreement with the UK. (It is not seeking this with Greece or Denmark, etc.). Imagine if the EU including the UK confronted Switzerland with the prospect of frosty diplomatic and economic relations unless it were to stop acting as a safe haven for untaxed funds. Switzerland would jump very quickly indeed. For support for this assertion look at how quickly it rescinded its objection to Art. 26 (Exchange of Information) of the OECD Model Tax Treaty! Threatened with sanctions by the Group of 20 it changed its position very quickly indeed. (Whether or not that change will be effective from the point of view of wealth creating countries is another question.)
[…] received this comment today: Richard, might I ask an unrelated […]
(@Darren) The U.S. is an interesting case. They have had automatic exchange of information with Canada precisely regarding interest earned by Canadians in the U.S. for some time now. Beyond this, it is the U.S. that is dismantling Swiss bank secrecy bank by bank (first UBS, now Credit Suisse and after them ??) rather than, like the UK and Germany, entering into these apologist agreements. So perhaps we could say that the balance between privacy rights and right to hide your money untaxed offshore in the U.S. is healthy?