For the second time this morning, I pick up a significant change in sentiment in a news story that suggests real change is afoot. First it was the NHS, now it is about the UK Swiss tax deal, and importantly, the change in mood music is coming from Swissinfo, which has reported:
The tax deals which Switzerland reached last year with Britain and Germany could yet fail in the face of opposition in Europe and in the countries concerned.
The agreements use the so-called “Rubik” model for dealing with the undeclared billions held by foreign customers in Swiss banks.
It is quick and easy: the countries whose taxpayers have tried to hide their assets get an inflow of money straight away, and Swiss banks remain relatively attractive to the super-rich who prefer to keep a low profile.
It works by levying a withholding tax on the assets held in the banks. In other words, a tax is automatically levied on the interest they earn, and then remitted to the country concerned. But no information about the identity of clients is provided.
And that is the sticking point: the European Union is insisting on “automatic exchange of information”, so that tax evaders can be tracked down.
Apologies to them for a lengthy quite but it's necessary to get a sense of how Swiss sentiment is changing. And changing it is because this deal is beginning to look dead in the water.
It contravenes EU laws in the European Savings Tax Directive.
It undermines EU solidarity against tax evasion.
It helps preserve the concept of Swiss banking secrecy that was designed to assist tax evasion, and still does so.
And it's very obviously a tawdry deal.
Osborne and Hartnett went for it. But it looks like the EU will kill it, as a very few of us suggested possible. And that will be good news for the EU as a whole.
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We eagerly await with bated breath a response from the usual Rubik supporters who repeatedly trolled here that the toothless EU Commission dare not intervene against all powerful Germany… and that the EU member states desperate need for Rubik’s false promised short-term fiscal revenue would politically outweigh the EU demand for automatic exchange of information.
Next, their argument will be that automatic exchange doesn’t work or isn’t practical. It’s all an abomination ! LoL
First of all,Mark,I would congratulate you and your colleagues on a job well done with the revised ESTD. It is certainly very thorough and short of moving everything lock stock and barrel out of the ESTD Territories (and facing the problems of how to get ones hands on the loot down the road) it will be difficult to avoid the provisions.
There are two points which would concern me – firstly the costs of all the necessary record-keeping, etc. and secondly the sheer volume of information that is going to end up flying around Europe. Are the various Authorities equipped to deal with it?
Hang on – all this data is shared already within EU and is vastly bigger than the amount of new data
Of course mechanisms exist to use and interrogate it
Sarky. It’s not asthorough as you make out.. but you knew that nudge nudge, wink wink, say no more.
Yes, there are still some 30 ways one can plan for the savings tax amendments, but only two serious loopholes remains. However, the second revision of the directive is already under process and considers 8 of these “planning” methods, including the two loopholes. Furthermore, expect revisions every three years of operation.
Re your argument about sheer volume of information that is going to end up flying around Europe. seems to be a feeble retort against automatic exchange. Next we’ll be hearing that this info exchange won’t be as effective as withholding tax. LoL.
Short of moving everything lock stock and barrel out of the ESTD Territories. I wouldn’t bet the farm that this is a solution. Some things in pipeline or already the current EUSD amendments.
Interest paid by a branch (Permanent Establishment) of a bank head quartered within the territory, say Singapore or Bahamas, distributed to a non-resident of either the PE or Singapore will be deemed as interest paid by the H.O. and hence in scope even if that country not party to the EUSD. OECD and DTA taken into account
More than €15,000 that arrives into the territory from a list of countries that does not have commercial justification will be deemed as interest.
Manager within territory of say an entity / arrangement outside the territory, e.g. Panama foundation must apply the EUSD provisions irrespective of where account is held in the world.
Swiss bank making payment to say a New Zealand discretionary trust with UK trustee must report payment to UK tax authorities or withhold 35% tax, irrespective of the beneficial owner, even for example, if arrangement set up by a Russian resident for his family in Russia. See Art. 11(5)
Note that a “Capital Redemption Bond” or an “Annuity without longevity / mortality risk” is deemed as a financial deposit and regarded as a “non insurance” product. Hence these are regarded as “securities” and within scope as per Art 6(1)(aa). Worse, the entire gain including capital gains, is regarded as interest if in scope.
Eu good for something shock horror… I’m finding myself in two minds about whose side the EU is on. Some days it seems to be the bad guy, today not. The jury remains out, therefore.
So what about Jersey as well, which is still not automatically exchanging information but sticking with the withholding tax trickery.
Surely not a case of having to renegotiate all those TIEAs?
Quote from Jersey Gov website:
“Unlike Guernsey and the Isle of Man, Jersey is not intending to move to automatic exchange of information with effect from 1 July 2011.”
see http://www.gov.je/TaxesMoney/InternationalTaxAgreements/EUSD/Pages/LetterPayingAgentsJan11.aspx
Another Blog entry saying the Swiss Tax deal will die, along with yet more glee from all the little supporters. Apparently the EU is good today so you all support, yet tomorrow when the new EU budget rules are discussed the EU will be a threat to humanity….
So looking forward to when the EU buckles and lets the Swiss deal go through, will you leave these blog entries or will they vanish in embarrassment?
Only a simpleton sees the EU as all black or white
Yet the Tories are evil in everything they do with no humanity?…..eh simpleton?
Simply not true – I have met decent Tories and Tories have done decent things
I’ve never said otherwise
There is always something redeeming to find
So looking forward to when the EU buckles and lets the Swiss deal go through
Apparently denial ain’t just a river in Egypt.
Having looked at the Swiss deal in some detail whilst I admit its faults, e.g. it’s scaring the moderately weathy, but not the super rich I admit, it is likely to be more effective than any EU directive, which will sound grand in principle but ignored in practice.
To show that the Swiss deal is not completely ineffective, there is much professional advice presently being given to move from Switzerland to Lichenstein for example. And probably other jurisdictions too.