£5bn tax deal to end secret Swiss stashes

The Treasury has struck a deal with Switzerland to recoup unpaid cash from secretive tax evaders. But will it really all come out in the wash?

by Dave Waller
Last Updated: 23 Jul 2012
The aim of the deal is to get unpaid British taxes pouring back into the Treasury from private Swiss bank accounts, thus ending the exploitation of the country's secretive banking system. Which, it’s intended, would be good for Switzerland’s damaged reputation, as much as for the UK’s coffers.

So is this the deal that ends the Swiss status as a tax haven? George Osborne certainly thinks so. As well as likening rich tax evaders to benefit cheats (although with an altogether more tasteful line in tracksuits), the Chancellor’s been saying that the days when people could ‘stash the profits of tax evasion’ in Switzerland are over. The deal would see the Swiss making a one-off deduction from all existing accounts held by people who are liable for British taxes that have yet to be paid, in 2013. It would represent a sharp injection of much-needed cash to the UK till – reckoned to be as much as £5bn.

On a more long-term basis, the Swiss government and banks will apply a ‘withholding’ tax on behalf of the British government of 48% on investments and 27% on gains where the records show the person is liable for unpaid British taxes. And the Swiss banking system will magically become transparent.

At least that’s the idea. Critics have pointed out a few problems: despite the rhetoric the deal certainly seems to offer people discounted rates of tax in Switzerland compared with the UK; meanwhile the Swiss will have retained most of the secrecy in the system, which they’ll have control of. Plus it could undermine a more ambitious EU-wide deal that is still being negotiated.

The Swiss government and banks are meant to identify accounts held by British taxpayers acting on information from HMRC, withhold the funds and return them to the UK. If people want to challenge a payment the Swiss will be expected to disclose them to UK tax inspectors. As to whether the Swiss will ever hand over the details when required remains to be seen. Such foreign accounts are worth an estimated £125bn to the Swiss – will they really go all the way in eroding what is one of their main selling points?

And that’s one other major flaw for both sides on this deal – if the conditions prove too unfavourable for those canny savers, there’s nothing stopping them shifting their cash out to Singapore – not to mention raft of other less reputable offshore havens. And even a wealthy nation like Switzerland can’t afford to see that happen.

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