Switzerland » Tax Research UK

The OBR say the UK – Swiss tax deal is full of holes

Nov 302011

Fascinating commentary in the Office for Budget Responsibility Autumn Statement report on the UK- Switzerland tax deal. They say (page 118):

The UK-Switzerland tax deal announced on 24 August … is not included in the central projection as it is subject to ratification by the Swiss Parliament and a possible referendum. HMRC and Ministers have stated that the yield from this policy is in the range of £4 to £7 billion. We have not certified this costing. Our initial discussions with HMRC suggest there are significant uncertainties (in particular over the amount of UK funds in Switzerland that would be subject to the deal and the assumed level of compliance) and we currently judge that the yield is likely to be towards the lower end of the range. We will consider the available evidence further for the final costing.

This deal is, of course, one of ‘Hartnett’s specials’ - referred to on this blog often. It’s a deal that the European Commission says breaks EU law and which is both highly avoidable and quite deliberately designed by the UK to undermine the attempts to end tax havens, no doubt in an attempt the preserve tax abuse from the UK’s own tax havens on behalf of the City of London.

Now the OBR has spoken and in about the politest terms possible they have said they have no confidence at all in the projections for tax to be collected. Why? Because it is not yet proven to be legal and because, as they all too obviously realise, it can be avoided as easily as the average lamp post is missed every day by people on the pavements of the UK.

More than that – they know the funds in Switzerland are currently leaving by the suitcase by the hour for Singapore whilst they’re also saying they have no confidence in Swiss banks’ role as honorary tax collectors for H M Revenue & Customs.

If you’d want a louder message saying Hartnett was either gullible, and that the Swiss saw him coming, or alternatively he’s done a deliberately bad deal it would be harder to find.

Hat tip: Faisal Islam

EU threatens to sue UK over rogue tax deal negotiated by Dave Hartnett

HMRC, Switzerland, Tax evasion 14 Responses »

Nov 282011

As the FT reports:

Brussels is threatening to sue Britain unless ministers significantly alter a landmark tax deal with Switzerland, in a dispute that will cast doubt over the £4bn to £7bn of expected proceeds for the Treasury.

European Commission lawyers concluded that the bilateral deal, which recovers billions of unpaid taxes in return for protecting the prized secrecy of the Swiss banking system, is in breach of European Union laws that are tougher on tax evasion.

What can I say except I and the Tax Justice Network told you so, often?

It really is time people like the Treasury listened to us more often. We’ve invariably been right.

Take the UK – Swiss tax deal and then avoid it

Switzerland, Tax avoidance, Tax evasion 1 Response »

Nov 232011

I was intrigued by the commentary on the Q Wealth Report web site about the UK – Swiss tax deal. They said:

The tax justice crowd are already claiming that the treaties signed by the UK and Germany are a sell out. It seems to me, however, a very pragmatic and ultimately sensible decision on both parts. The Swiss get to keep their secrecy, including a new treaty provision that limits requests for information to a maximum of 500 individuals per year – a clause specifically inserted to avoid fishing trips. The UK gets good publicity about cracking down on tax cheats, and some people will likely be scared enough to pay the tax.

Crucially, they add:

On the other hand, it’s quite an easy tax to legally avoid.

And then the say how – which is all too easy.

Which is exactly what we in the tax justice crowd have been saying.

And which is exactly why this is an appalling deal for the UK.

Which proves just how inverted their logic really is.

Especially when you remember this deal is aimed at evaders, not avoiders.

Now why would they want to help them?

Hartnett doesn’t just not apply the law, he breaks it too

HMRC, Switzerland, Tax Havens 20 Responses »

Nov 172011

Europolitics has noted:

Manoeuvring over Rubik is in full swing. The European Commission is pressuring Germany and the United Kingdom to change the bilateral fiscal agreements they have worked out with Switzerland. If they refuse to do so, it will open infringement proceedings against Berlin and London by the end of the year. The texts have already been drafted.

The UK – Swiss deal to which this refers was, of course, Dave Hartnett’s work, and gives up UK tax sovereignty to the Swiss in significant areas for good. As the report continues:

The Rubik agreements make provision for the introduction in Switzerland of a withholding tax in full discharge of all tax obligations on the assets placed by German and British residents in this country and on the income they continue to collect on these assets in the future in a variety of forms (interest, dividends, capital gains, etc).

The Commission’s Legal Service considers that Berlin and London have overstepped their competences by signing these agreements, which protect the anonymity of fraudsters and whose scope partly interferes with EU rules on the taxation of savings income – and the agreement between Berne and the EU in this area. There are also certain “technical problems” inherent to the Rubik system. The rate of withholding on income from these assets paid to Germans, for example, is set at 26.375%, compared with 35% under the savings taxation agreement. The tax will also constitute full discharge of tax liability. Germany and Britain have also agreed to give Swiss financial service providers easier access to their market.

The Commission’s legal experts therefore recommend the opening of proceedings against Berlin and London before the EU Court of Justice for failure to fulfil obligations.

Negotiations are, of course, going on, but that this outcome was likely was predictable from the moment these hideous and rather sordid deals that trade a little cash for exonerating criminal activity in the past without penalty whilst permitting it in the future were pout on the table.

So why did Hartnett do the deal? Is he really on the side of tax evaders? It looks like it. And now we know he’s even willing to break EU law to help them. Amazing.

It’s knuckle rapping time for the The UK on its Swiss tax deal

HMRC, Secrecy jurisdictions, Switzerland, Tax evasion, Tax Havens 2 Responses »

Oct 272011

Algirdas Šemeta, the EU Commissioner for Taxation and Customs Union, Audit and Anti-Fraud, addressed the EU Parliament late on Tuesday and talked about the UK- Swiss (and similar German) tax deals.

The German deal he reckoned was illegal on the basis of the tax rates in operation. I think we can safely assume a rapid challenge is going to happen on that one.

In fairness he didn’t say that of the UK deal, but he wasn’t kind either - especially remembering this was in diplomatic language. This was the nub of it:

Taking into account their wide scope, the bilateral agreements may also cover aspects already covered by the EU Savings Directive and/or the EU-Swiss agreement. Insofar as the bilateral agreements may prove to cover areas of exclusive EU competence, the Commission would take this matter very seriously. It would not hesitate to take the corrective steps if necessary.

In other words, they’re not happy and are going to challenge this deal, abiout which the UK did not consult the EU.

That’s another fine mess Mr Hartnett has gotten us into in pursuit of George Osborne’s pro-tax haven policy.

A Bloomberg editorial says it’s time for Swiss banking secrecy to go

Switzerland, Tax evasion, Tax Justice Network 1 Response »

Oct 252011

A Bloomberg editorial today says:

Switzerland’s bank secrecy laws and anonymous numbered accounts have a long and shameful history: They have been used to help criminals conceal illicit gains, to deny Holocaust survivors their stolen inheritances and to help the world’s wealthy hide taxable income.

So it’s a welcome sign that 11 firms may be on the verge of agreeing to pay billions of dollars in penalties and reveal the names of Americans who used Swiss bank accounts to evade U.S. taxes, according to a Bloomberg News article yesterday.

As they note:

U.S. prosecutors held out the threat of criminal indictments, which is tantamount to a death sentence for a bank.

And the add, importantly:

Finance Minister Eveline Widmer-Schlumpf said that the country wants to reach an agreement with the U.S. so that Switzerland isn’t confronted “with the same issue time and again.” If that’s the case, Switzerland shouldn’t assume the U.S. will accept deals like those reached earlier this year with the U.K. and Germany, allowing the identities of customers with untaxed assets to remain secret.

There’s good reason for that: as they say:

Unfortunately, Switzerland has cooperated only grudgingly in meeting international banking standards, agreeing to do so in 2009 under threat of sanctions and being named as a tax haven by the Organization for Economic Cooperation and Development. Even so, the country this month was ranked at the top of a financial secrecy index developed by the London-based Tax Justice Network.

Switzerland should do itself a favor and abandon the financial opacity that has made it the world’s No. 1 destination for offshore wealth. It has no place in a globalized world where money can be electronically whisked from one place to another, except as a cloak for financial wrongdoing.

This is one of the biggest financial news networks iin the world and it is arguing the UK is wrong, Switzerland is wrong and the Tax Justice Network is right to take its position.

Times are changing, at least a bit.

EU to come down very hard on the UK – Swiss tax deal

EU STD, Europe, Secrecy jurisdictions, Switzerland, Tax evasion, Tax Havens, Tax Justice Network 2 Responses »

Oct 252011

Europolitics has reported today:

The European Commission is planning to attack the tax agreements concluded by Switzerland with Germany and the United Kingdom, on 25 October in Strasbourg. It finds that Berlin and London have encroached upon the Union’s powers by negotiating bilateral arrangements with Berne that interfere with savings taxation rules.

Taxation Commissioner Algirdas Semeta will answer that evening an oral question by British Liberal Sharon Bowles, on behalf of the EP Committee on Economic and Monetary Affairs (ECON), which she chairs.

MEPs question the compatibility of these Rubik agreements, set to enter into force in 2013, with EU rules on taxatin of savings income, which provides for a 35% withholding tax at the source (not in full discharge of liability) on interest earned on savings. More generally, they wonder whether states have the power to negotiate such bilateral tax agreements and whether the Rubik system may present an “obstacle” to revision of the EU savings taxation directive and of the EU’s agreements in this area with Switzerland, Liechtenstein, Andorra, San Marino and Monaco. Will not Rubik agreements “have the effect of halting the move towards an automatic exchange of information for tax purposes,” they ask.

The question answers itself. Luxembourg and Austria have already seized the pretext of Berne’s arrangements with London and Berlin to hold up the savings taxation issue in the EU.

Keen on being treated equally with Switzerland, in order to prevent any capital flight, they refuse to be obliged to switch from the system of withholding at the source to the automatic exchange of information between tax administrations, and to abolish their banking secrecy in the process.

In the context, Commissioner Semeta plans to take a very hard line, on 25 October, and to denounce an abuse of power by Germany and the United Kingdom – except no doubt for the amnesty operation, which the Commission does not have the competence to prevent.

And as they note this is in the context of:

The global network Tax Justice will publish, on 25 October, a study that pillories London and Berne. Its conclusions will doubtless be identical to those of a tax specialist based in Zurich, who is consulted regularly by the Commission and prefers to remain anonymous.

So not only are the UK incompetent in their dealings with Switzerland, they’re also incompetent in their dealings with Brussels who have rumbled exactly what Osborne and Hartnett are doing – which is to undermine any effective challenge to tax havens.

It’s good news that the EU is fighting back. So they should. The promotion of tax haven abuse is unacceptable anywhere - including in London.

The US demands tax justice for its Swiss tax evaders: the UK settles for 30 pieces of silver

Corruption, Secrecy jurisdictions, Switzerland, Tax evasion, Tax Havens, Tax Justice Network Comments Off

Oct 252011

The UK has signed a tax haven deal with Switzerland it won’t even come near to raising the money claimed for it, whilst perpetuating bank secrecy. So says the Tax Justice Network this morning, and rightly so.

In the meantime the USA has taken a different approach. As Bloomberg report:

Swiss banks will probably settle a sweeping U.S. probe of offshore tax evasion by paying billions of dollars and handing over names of thousands of Americans who have secret accounts, according to two people familiar with the matter.

U.S. and Swiss officials are concluding negotiations on a civil settlement amid U.S. criminal probes of 11 financial institutions, including Credit Suisse Group AG (CSGN), suspected of helping American clients hide money from the Internal Revenue Service, according to five people with knowledge of the talks who declined to speak publicly because they are confidential.

Switzerland, the biggest haven for offshore wealth, wants an end to new U.S. probes while preserving its decades-old tradition of bank secrecy, the people said. The U.S. seeks data on Americans who have dodged U.S. taxes and a pledge by Swiss banks to stop helping such clients, according to the people. The Swiss reached accords this year with Germany and the U.K. on untaxed assets.

“The Swiss would like to get out of this by paying money, and they’ve done that with other countries,” said tax attorney H. David Rosenbloom of Caplin & Drysdale Chartered in Washington, who isn’t involved in the talks. “For the U.S., it’s not primarily a money question. It’s a matter of making sure the laws apply fairly among taxpayers.”

And that’s it in a nutshell. The UK has done a tawdry deal with Switzerland that lets it continue to operate as a tax haven and demands no names of those active, habitual and large scale criminals who have used it to evade tax.

The US demands justice and puts cash second.

Who has the priorities right? Clearly the US has. And what’s more, I have no doubt it will also raise a great deal more money, even in relative terms, as a result.

But then, Hartnett, HMRC and Osborne all support tax havens. No other explanation for their behaviour is possible.