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Rise of the Taxman: Osborne Hits Swiss Bank Accounts

Posted on the 25 August 2011 by Periscope @periscopepost
Rise of the taxman: Osborne hits Swiss bank accounts

Swiss francs: on their way to Britain? Photocredit:

Has the world woken up to tax? Whilst most people struggle on dutifully with their payments, the super-rich are often seen as getting away without coughing up their fair dues. And now it’s cashing in time at the Treasury, as Chancellor of the Exchequer George Osborne has signed a deal with banks in Switzerland which will open up the secrecy surrounding accounts held in that mountainous country. The deal will bring in up to £5 billion to our empty coffers.

Britons with untaxed income in a Swiss Bank account will have to pay between 19 and 34 per cent in a one off payment, to allow for past tax avoidance. Swiss banks will pay 500 million swiss francs of this in 2013, whilst a new withholding tax will take away the reasons for using them in the first place, equalling 48 per cent of undeclared income and 27 per cent of undeclared gains. Whilst anonymity will be preserved, the UK reserved the right to demand the details of 500 of its citizens a year. John McDermott on The Financial Times has called it a “win-win” situation.

Meanwhile, in France, 16 millionaires, including the richest French woman, Liliane Bettencourt (heiress to the L’Oréal SA fortune) have written to the government asking to be taxed more. “At a time when the government is asking everyone to show solidarity,” it reads, “we feel we must contribute.” The letter came on the same day that President Sarkozy announced an austerity package which hits those earning over 500,000 euros with a 3 per cent tax rise. It comes as zillionaire Warren Buffett asked the American system to tax him more, too.

“We made it a priority to go after those who don’t pay their fair share. The days when it was easy to stash the profits of tax evasion in Switzerland are over,” said Chancellor George Osborne.

  • The dilemmas of governing. So the Chancellor’s “played a blinder”, said Faisal Islam on his Channel 4 blog.  Sure, £5 billion is a lot, but it’s much less than what we could get if people were “hit in the conventional way.” It’s the Swiss who will be dealing with this – thus keeping their traditional secrecy. If it had been a normal person, then payment “would be more like 80 percent.” Germany’s signed a similar deal – but it might not get through parliament. And it’s possible that these deals have “scuppered” an EU-wide agreement which would truly unpick Switzerland’s banking secrets. It’s a “classic dilemma of governing. For a significant amount of cash, would you have let Switzerland and tens of thousands of tax avoiders off the hook?”
  • Quiver in your boots, all ye tax evaders! Tax evasion is a “shady world”, said Ian Cowrie in The Daily Telegraph. Critics are claiming Osborne’s deal doesn’t go far enough. Extremely wealthy and politically influential as most of them are, tax evaders won’t be “named and shamed.” So is it one law for plumbers and another for plutocrats? “Probably.” Rich people tend to be ingenious at this sort of thing. But what this deal does is show that the balance is “shifting in favour of tax authorities.” Digitally stored information means it’s easy to access – viz. what happened in Liechtenstein, where an employee sold data to HMRC for millions of pounds. “Technology has changed the game for tax evaders.”

“It seems there is a stark choice for those who have abused Swiss banking secrecy – come forward and disclose, or run the risk of losing over a third of your historic Swiss assets. But the authorities need to take care that the innocent and the confused do not get caught up in this. There will be people who simply don’t know whether they have a problem and they will need help to sort their affairs out,” said Paul Harrison, KPMG’s head of tax investigations.

  • Lessons to be learned. “Supporters of the coalition will be heartened,” said David Blackburn on The Spectator Coffeehouse blog. The Lib Dems have long hoped to limit tax avoidance; maybe there’ll now be “room for manouevre” on the 50p rate. Some will ask “why wasn’t this deal done sooner?” Gordon Brown rejected a similar offer ten years ago. There are doubts, though: a similar arrangement with Liechtenstein has worked “reasonably well.” Governments will keep “pursuing their wealthy citizens, such are the political and financial gains.” The lesson from this is that the idea “that Britain should leave the European Union and ape Switzerland as a low tax economy suddenly looks less attractive.”
  • This was a long time coming, but will it have any effect? Andrew Clark in The Times was less enthusiastic. “Switzerland has been the ultimate banking destination for wealth, prestige and discretion since the 1930s.” This deal is merely “the latest gap in Switzerland’s defences.” It started in 2008, with the arrest in the US of a Swiss banking executive named Bradley Birkenfeld, a middle-ranking executive at UBS. He “spilled the beans to an astonishing degree, even telling how he hid diamonds inside a toothpaste tube to get them across a border on behalf of a wealthy US client.” His arrest started an enormous effort in the US to bring Swiss banks to heel. Switzerland has little choice but to agree to Britain’s tax settlement. The banks have to “play by the same rules as their foreign counterparts.” But this isn’t the “end for tax avoidance.” The world’s super-rich “will always be able to find smaller, more obscure territories with a firm attitude on ‘privacy’”.

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