George Osborne said in his budget speech this week:
I regard tax evasion and — indeed — aggressive tax avoidance — as morally repugnant.
I regret to say he was lying. He can challenge me if he wishes, but he'd lose because the evidence is unambiguous and wholly in my favour. On Tuesday - just the day beforehand the UK signed a deal with Switzerland on funds held in Swiss bank accounts by tax evading UK resident people (it has to be tax evaders - those already declaring are not covered by the deal). Under that deal the FT notes
Income and gains on the Swiss assets will be subject to the 35 per cent withholding tax levied under the EU savings tax directive. In addition, the UK will levy a “tax finality payment” of 13 per cent to bring the rate up to 48 per cent, in line with the initial agreement.
In addition, Swiss accounts will be subject to a one-off deduction of between 19 per cent and 34 per cent of their value.
Now let's be clear what this means and how it works.
First this applies to any funds in Switzerland where the owner tells the Swiss bank that they do not wish to advise the UK and H M Revenue & Customs of the fact they have an account. Why would you do that? Only, of course, because you had something to hide. In the past that may have been the income earned on the account. In the future it will be the money paid into the account. Why would you hide it? Because you did not want to pay tax on it or because it was the proceeds of crime, of course. That is the only possible explanation. I defy anyone to suggest another that is plausible - and privacy is not an issue, so please don't raise it. So, by definition, all accounts to which this agreement applies contain criminal funds since tax evasion is a crime in the UK. There may be other crime to, but at the most basic level there will be the crime of tax evasion associated with such accounts or it would make no sense for anyone to take part in this scheme.
Second, although this agreement explicitly recognises that the Swiss banks who will now collect this tax have been for decades openly assisting UK tax evaders, as has of course the Swiss government who have created the criminogenic environment in which their banks can operate (and did so deliberately in 1934 with the explicit aim of assisting tax evaders) we are now going to give them the absolute right to assess UK tax without having any recourse at all to check what they are doing! We are therefore trusting those who have explicitly assisted crime to collect our tax. It's hard to think up anything more bizarre!
In exchange for this unauditable cash which with regard to past payments is likely to represent billions less than any reasonable sum owing - a process which therefore rewards crime explicitly - we waive the obligation for all who use Swiss bank accounts to ever mention the fact on their UK tax return - which will now be deemed complete despite that absence - a previously wholly unprecedented arrangement. In other words, these criminals are explicitly allowed to hide their crime and we cannot now penalise them for doing so.
Third, let's be clear - the EU objected to this explicitly because they said it contravened the European Union Savings Tax Directive that has just one purpose, which is the beating of tax evasion, and so the UK built a loophole any tax abusing accountant would have been proud of into the scheme to aggressively avoid the obligations of that directive to ensure we could explicitly help evaders to continue with their crimes by deeming the tax the Swiss will collect to be in two parts - one an EU part and the other a UK top up. It's unbelievable that at a time when HMRC says it wants to stop schemes with artificial steps in them that it would resort to using a wholly artificial scheme to help tax evaders using Swiss banks, and yet that is what they are doing.
In other words - this whole scheme is designed to help tax evaders, reward tax evaders and undermine the EU's law intended to stop tax evaders. It's not just profoundly unethical it has to be wondered whether it is legal and ultr-vires H M Revenue & Customs's powers to sign it. Most definitely it helps tax evaders is utterly morally repugnant and yet George Osborne praised it. Which is why he's a liar.
But then it has to be asked, why did he go to such effort, and why has he so explicitly sought to undermine EU efforts to crack down on tax evaders and the only answer can be a simple one - which is that this government did this in an unholy alliance with the Swiss to protect their tax evasion industry because if that had been broken the tax evasion industries in Jersey, Guernsey, the Isle of Man, Cayman, the British Virgin Islands and so many other branch offices of the City of London would have been broken as well. So this support for tax evaders is not chance: the only explanation for this is that it is British government policy to now assist tax evasion through tax havens.
That's why George Osborne undoubtedly lied.
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Is there any way in which the legality of what Osborne and co have done could be challenged?
So, Osborne’s strategy is to make lots of holes in the bucket then declare that it can’t possibly carry much water because, for some unaccountable reason, it leaks like a sieve.
The man really is a creep.
To be really puke sick, every single UK-resident can simply set up a Panama discretionary trust to hold the Swiss bank account for a whopping cost of £350 and annual charges of similar. Your Uncle will be trustee. The Rubik tax agreement specifically exempts structures which do not have an immediate identifiable beneficiary such as discretionary trust or foundation. This is not a loophole, this is a highlighted exemption.
Then when you want to get paid out the lolly in Switzerland you “get” your Uncle to pay you out a “consulting fee or directors remuneration or loan”. As these sham payments are not investment income, this avoids Rubik altogether. One can just imagine the Swiss banks stepping in to halt this practice.
…and that’s only one of ten ways to avoid the Rubik. A masterful agreement by one and all. STEP will be pound the table that trusts are not used for tax evasion, even though teh Liechtenstein tax scandals of 2008 were ALL trusts and foundations.
Hopefully, when EUSD amendment are passed, the settlor will be regarded as the beneficial owner, even if trust is irrevocable or settlor is not entitled to the income, etc.
For for the price of a budget meal at the Fat Duck you can avoid all the taxes. That’s what happens when muppets agree to a Alpine derived tax deal..
Osborne, the chancellor of the exchequer, is organising ways in which people can steal the public money of which he is in charge. He is helped in this by a civil servant who lets large companies off paying much of their due tax and signs agreements with foreign powers that let them to hide the stolen money that British individuals and companies deposit there.
I am struggling here. It looks like treason, fraud, corruption, conspiracy and theft. Can someone explain what I’m failing to see?
I think you’re seeing quite clearly
The point you make at the end about the City of London not wanting to rock the boat on this is a evry important one, The City of London is also pretty selective about regards as being the funds arising from criminal activities so that it can take deposits from a whole range of dodgy sources.
To give one example for many years after the collapse of the Soviet Union it was against Russian Law fro Russian citizens to open a foreign bank account without prior permission from the Central Bank of Russia or for Russian comanies/individuals to export most natural resources with a governement licence to do so. Somehow that didn’t stop an awful lot of deposit accounts being opened in London funded by the proceeds from illegal sales of commodities – the net result being an awful lot of ordinary Russians suffered as a result of theft of natural resources that should have been used to develop the country – aided and abetted by the City of London in its role as one of the world’s main money laundering centres. And what did the City do at the time – short answer absolutely nothing.
As for George himself – he clearly has done some avoidance on his own account – given the potential for conflict of interest shouldn’t all those having the power to influence Treasury tax decisions have to make their tax returns public as in many other countries. If only so that we see if George’s abhorence of aggresive tax avoidance amounts to self loathing?
Not sure at all that this deal represents a loophole in the EU’s legislation. EU law always intended for member states to retain full sovereign authority over what constitutes their resident taxpayers’ tax obligations (and their discharge). The UK has exercised that authority by passing domestic legislation to the effect that any tax withheld by Switzerland under the EU treaty is causing a full discharge of its residents’ tax liabilities.
This is EXACTLY the letter and the spirit of the laws passe by the EU and, far more importantly, our Parliament.
If you had followed the EU debate – as I have – you will know this is a deliberate act on the UK’s part to flout, get round or abuse the EU’s desire to beat tax evasion by using trickery
There is no more or less to it than that
Richard, I have followed the EU debates.
The fact is that the UK has been a reliable supporter of many EU level initiatives on cross-border taxation. But the EU has been unable to make any progress on savings taxation since 2004 due to divisions and political games between member states and the incompetence of the Commission. The UK has nothing to show for its support.
In any event the EU is a sideshow. Tax is a sovereign matter over which Parliament should retain full authority. In the case of the Swiss tax deal, the EU Commission was challenging our Government’s decision with respect to the taxation of UK residents. On what basis the EU believes it has any legitimacy to do this is a mystery. We should applaud the Governement for shutting Brussels down.
The EU has been the best advocate for beating evasion in the world
And has been highly successful
That’s why Osborne is determined to beat it
It was getting very close to success again
Richard,
Respectfully I disagree. As with everything else, the EU has many ambitions, but precious few achievements. The EU Commission talks a big game, but it has neither the competences nor the power to get anything done. All tax-related decisions require unanimity, and member states are deeply divided, leading too year-long stalemates.
The Savings Tax Directive, even as it is, has been a major achievement
The Code of Cionduct more so
You offer rhetoric
I offer facts
What about these facts then: The Savings Tax Directive is so full of loopholes it is widely viewed as not worth the paper it is written on. The Code of Conduct is a truly pathetic example of the EU at work: years of endless negotiation that result in a NON-BINDING undertaking, worth nothing. It has proved completely ineffective at preventing tax relocations to Ireland, the Netherlands or Luxembourg.You are really polishing some dirt here.
More importantly, the EU has been utterly unable to achieve any sort of leverage in its negotiations with non-EU sates near (Switzerland) or far (Singapore, Bahamas). Only member states acting unilaterally have been able to achieve anything. In the space of 3 years the United States, by imposing the FATCA regulations on all financial institutions conducting business in the US will have achieved more than the EU has done in 30 years.
I am noit for a moment denying the weaknesses in what has been achieved
But the ESTD has paved the way for automatic information exchange
And the Code has transformed many tax behavious – especially in the Crown Dependencies
You decry both and appear happy to note that obstacles are placed in its path
Respectfully, I only hear such comments from libertarian supporters of tax abuse and crime
Jason,
It wouldn’t be bad that the Rubik fulfills UK tax payers obligations IF it weren’t so piss easy to avoid / circumvent / exempt with the most basic of offshore structures. UK negotiators had the wool pulled over their eyes and a cuckoo clock shoved up their Toblerone.
Think I need a simple man’s guide to understand all this.
Hello richard,
I heard you on radio 2 on budget day discussing the budget, Your points were sound and had the depth of knowledge reqiured of such matters. I wonder why the BBC put you up against an amateur from some institute.! .
Well done.! we need you to continue to do this amazing work you do. your site will now be part of my daily reading. got some catching up to do.
james
Thanks
Is it true that George Osborne’s family money is tied up in such a way as to be, effectively, avoiding taxation, or is that just an internet calumny?
But why should we believe he finds tax evasion morally repugnant when this is the party that gave us ‘we’re all in it together’, ‘no top-down far-reaching reorganisations of the NHS’, ‘The NHS: safe in our hands’ and so on ad nauseam.
At least when Mandelson said New Labour was ‘intensely relaxed about people getting filthy rich’ he was entirely truthful, if not on his mortgage application…
Sorry – no expert on Osborne’s affairs
But you’re right on the rest!
I know people pooh-pooh conspiracy theory, but this to me is clearly one example of conspiracy at work. Why else would Osborne do something like this? Stupidity? Doubtful.
This is a deliberate act to deceive the public and allow financial interests to profit at the expense of the greater society.