So now the Swiss will decide what tax rate UK taxpayers will pay

Posted on August 24 2011

I should stop blogging on UK - Swiss the tax deal but it's so bad I can't, yet.

Consider this.  Under the deal the tax withholding rate to be applied to the accounts of UK taxpayers holding bank accounts in Switzerland who do not want details of their affairs disclosed in the UK will be a few per cent lower than  their UK marginal tax rate. But to determine that we will be in the extraordinary position that the Swiss will have to know the full tax affairs of the taxpayer in question: that person will have to make complete disclosure to the Swiss authorities of what their UK income is so that they can decide what tax rate will be due on the witholding even though the UK authorities will be denied that same information.

What this in effect means is that we have  now passed control of determination of a UK taxpayer's affairs to the Swiss. That is quite incredible. What HMRC don't know and can't do the Swiss will know and must do.

This is the abandonment of tax sovereignty by the UK.

I sincerely hope someone in Labour is going to make a big fuss about this.

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12 Responses

  1. william says:
    August 24 2011 at 9:29 pm

    The UK government could in future reduce its top rate of tax to a level that nullified this tax rate arbitrage,but I suppose this is ideologically difficult.

  2. David Wilson says:
    August 24 2011 at 11:17 pm

    You bet it’s ideologically difficult !

  3. Marcus says:
    August 25 2011 at 8:52 am

    In the current financial climate, the top tax rate should rise, not fall. Quite simply, those that can afford it must pay more.

  4. JohnM says:
    August 25 2011 at 11:54 am

    But higher rate tax avoiders cannot afford it.
    Frequent holidays cost money…
    Expensive private islands cost money…
    And the alimony to the recent ex also costs money…
    Having your private space-plane costs money…..
    Yachts cost money…..
    And the gov will only give it to the ungrateful classes…

  5. George says:
    August 25 2011 at 12:24 pm

    I don’t think this is right. The withholding is 48 per cent whatever their UK rate of tax. If they are not on the 50p rate and want to claim the money back they will have to disclose.

    Announcement says: “From 2013, a new withholding tax of 48% on investment income and 27% on gains will ensure the effective future taxation of UK residents with funds in Swiss bank accounts”

    • Richard Murphy says:
      August 25 2011 at 3:03 pm

      I have accepted that this was based on early press releases – later data makes clear that the varying rates relates to the source of income not the persons crircumstances

  6. Robin Levett says:
    August 25 2011 at 2:03 pm

    Richard

    I presume you have read the “Basic Information” about the deal published by the Swiss. This includes a passage as follows:

    The rates of the final withholding tax are in line with the United Kingdom’s marginal tax rates on income and gains, and amount to 48% for interest income, 40% for dividend income, 48% for other income and 27% for capital gains. The small deduction from the marginal tax rates in the United Kingdom is justified by the fact that a tax at source is levied earlier in time.

    I can see nothing in that passage that suggests that the Swiss paying institutions (who will be deducting the withholding tax, just as paying institutions do here in the UK) will need to know anything other than (i) the nature of the payment they are making, and (ii) the fact that the recipient is UK resident. Why do you suggest otherwise?

    • Richard Murphy says:
      August 25 2011 at 2:55 pm

      I accept that this further information has over-ridden the information in earlier releases on which I based that comment

      • Robin Levett says:
        August 25 2011 at 5:20 pm

        I don’t want to be dfifficult, but the press release to which you linked in the OP contains this passage:

        Final withholding tax for the future: Future investment income and capital gains should be directly covered by a final withholding tax. The tax rate has been set between 27% and 48%, depending on the category of capital income. The tax rates are slightly under the regular marginal UK tax rates.

        Note the italicised words.

        It also contained a link to the basic information from which I quote above.

      • Richard Murphy says:
        August 25 2011 at 6:36 pm

        Yes – and I’ve said I got it wrong

        Whoopee

        You’ve proved I’m human

        I relied on another source to form my opinion – and have since realised that I in good faith wrote something incorrect

        And I admit it

        Next?

  7. Robin Levett says:
    August 25 2011 at 5:49 pm

    …and just one further point; would it not be appropriate to update your original post to confirm the true position – not everyone will look at the comment section to find that the post is based on a false premise.