UK-Swiss Tax Deal Under Fire

A deal struck between the Swiss government and the HMRC has been accused of not doing enough to prevent tax avoidance

London, UK (Pryce Warner International) October 31st, 2011 – On October 6th the HMRC struck a deal with Swiss tax authorities that aimed to clamp down on UK citizens using Swiss banks to avoid tax.

The deal reportedly would earn the UK between £4-7Bn by forcing UK citizens with assets in Switzerland to pay an increased rate of tax on investments and gains. Unlike a similar deal made with Germany however, Swiss banks can continue to preserve the anonymity of account holders.

As was suggested at the time and has been further confirmed by the Tax Justice Network (TJN) recently, in practice the deal may in fact have little or no impact on individuals’ ability to avoid paying UK tax.

The TJN conducted a study into the agreement, which has found that it in fact may actually “lose the UK tax revenue”. In addition to this they claim to have found several loopholes that would allow individuals to dodge the rules and to continue to avoid tax.

One of the principle concerns of the study was the fact that the deal does not come into force until 2013, thereby giving individuals and advisors plenty of time to move assets into jurisdictions that do not have such an agreement in place.

John Christensen, the director of the TJN, commented: “It’s hard to see how the British public will benefit in any way from this flawed agreement. Worse, it will reverse years of progress made by the EU towards tackling tax evasion through automatic information exchange. It is impossible to see how the HMRC can describe this deal as being in Britain’s interests.”

Defenders of the deal have suggested that despite there being some flaws in the deal, overall it is a step in the right direction and it will still bring in additional revenue to the UK.

They also point out that some of the loopholes will not be exploitable by all, for example, those who are beneficiaries of genuine discretionary trusts may escape but there are a lot of other foundations and trusts arrangements where it will be obvious who the owners are.

Another loophole that the TJN pointed out was that Swiss banks can simply move assets between branches, however defenders of the deal say that few Swiss banks will allow this and those that do may only allow individuals to move a small percentage of their assets.

David Harra, a Senior Market & Investment Analyst with Pryce Warner International, a Financial Services Provider for Expats, commented: “As we reported earlier this deal is fundamentally flawed and does not do enough to stamp out tax evasion. There are numerous legitimate schemes and funds that allow people to reduce their tax burden as Expats but legislation like this creates an impression not only that the government is not interested in stopping illegal tax evasion but also that they are happy to tarnish the reputation of an entire industry in the process. Claims that loopholes can be avoided and that not everyone can take advantage of them are not good defences. For this proposal to have any real impact the UK needs to agree something similar to the agreement made by Germany, which no longer protects the anonymity of those with accounts in Switzerland. As it stands there are plenty of other jurisdictions people can move their assets to and they have plenty of time to do so.

Pryce Warner International Group provide International Asset & Investment Management, Independent Financial Advice & QROPS Overseas Pensions.

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By: Aneil Fatania
Financial Editor
Pryce Warner International Group
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