The UK and Swiss Governments have signed a declaration on the ‘initiation’ of negotiations, expected to begin next year, on the introduction of a flat rate withholding tax on savings income. Critics warned that the deal would protect the identity of tax evaders.
The Tax Justice Network claimed that Britain had ‘surrendered to the interests of big finance and secret wealth’. A Daily Telegraph report noted that the deal ‘will not raise as much as if the full sums held on deposit were disclosed’. But a Treasury spokesman was quoted as saying the agreement was ‘a sensible and pragmatic approach by the Chancellor to ensure we get money in that would otherwise not be collected’.
Swiss banks proposed a withholding tax on the interest, dividends, capital gains and investment income earned by foreign investors ‘to deflect attacks on the country’s secrecy laws’, Bloomberg reported, adding that undeclared assets in Swiss bank accounts held by UK nationals had been estimated at $61.5 billion, and that HMRC had indicated last year that withholding taxes do not meet OECD standards for transparency ‘because client identities remain secret’.
The Swiss Department of Finance said in a statement: ‘Future investment income should be covered by a withholding tax, the rate of which has yet to be negotiated. The final withholding tax is a tax at source. After it has been paid the tax obligation towards the country of domicile will have been fulfilled.
'Extended administrative assistance has been agreed in order to prevent any possibility of circumventing the withholding tax. This envisages that the UK authorities can submit a request for administrative assistance which states the name of the client, but not necessarily the name of the bank. The number of requests that can be submitted is limited and must be well founded. Fishing expeditions are not permissible.’
The parties agreed that ‘untaxed existing assets should be regularised’. But Richard Murphy, director of Tax Research UK, said no indication was given as to how this would happen given that ‘the £40 billion or so of evaded assets will not have to be declared by name by the Swiss’.
The Swiss Bankers Association welcomed the declaration. Its CEO, Claude-Alain Margelisch, said: ‘The agreement is fair and balanced. UK clients of Swiss banks gain the opportunity to regularise their undeclared assets while maintaining their financial privacy.’
It claimed that the UK had acknowledged that ‘the flat-rate tax solution represents an equivalent measure to an automatic exchange of information’.
Andreas Kolb, a Partner in the Switzerland office at Eversheds, observed: ‘It is somewhat surprising that the United Kingdom is the first country with which Switzerland has signed a basic agreement on dealing with untaxed money, especially given that the UK’s Channel Islands are known the world over for the legal possibilities they offer in terms of concealing money via trusts. These constructions are often much more confidential than the famed Swiss bank secrecy.’
The UK and Swiss Governments have signed a declaration on the ‘initiation’ of negotiations, expected to begin next year, on the introduction of a flat rate withholding tax on savings income. Critics warned that the deal would protect the identity of tax evaders.
The Tax Justice Network claimed that Britain had ‘surrendered to the interests of big finance and secret wealth’. A Daily Telegraph report noted that the deal ‘will not raise as much as if the full sums held on deposit were disclosed’. But a Treasury spokesman was quoted as saying the agreement was ‘a sensible and pragmatic approach by the Chancellor to ensure we get money in that would otherwise not be collected’.
Swiss banks proposed a withholding tax on the interest, dividends, capital gains and investment income earned by foreign investors ‘to deflect attacks on the country’s secrecy laws’, Bloomberg reported, adding that undeclared assets in Swiss bank accounts held by UK nationals had been estimated at $61.5 billion, and that HMRC had indicated last year that withholding taxes do not meet OECD standards for transparency ‘because client identities remain secret’.
The Swiss Department of Finance said in a statement: ‘Future investment income should be covered by a withholding tax, the rate of which has yet to be negotiated. The final withholding tax is a tax at source. After it has been paid the tax obligation towards the country of domicile will have been fulfilled.
'Extended administrative assistance has been agreed in order to prevent any possibility of circumventing the withholding tax. This envisages that the UK authorities can submit a request for administrative assistance which states the name of the client, but not necessarily the name of the bank. The number of requests that can be submitted is limited and must be well founded. Fishing expeditions are not permissible.’
The parties agreed that ‘untaxed existing assets should be regularised’. But Richard Murphy, director of Tax Research UK, said no indication was given as to how this would happen given that ‘the £40 billion or so of evaded assets will not have to be declared by name by the Swiss’.
The Swiss Bankers Association welcomed the declaration. Its CEO, Claude-Alain Margelisch, said: ‘The agreement is fair and balanced. UK clients of Swiss banks gain the opportunity to regularise their undeclared assets while maintaining their financial privacy.’
It claimed that the UK had acknowledged that ‘the flat-rate tax solution represents an equivalent measure to an automatic exchange of information’.
Andreas Kolb, a Partner in the Switzerland office at Eversheds, observed: ‘It is somewhat surprising that the United Kingdom is the first country with which Switzerland has signed a basic agreement on dealing with untaxed money, especially given that the UK’s Channel Islands are known the world over for the legal possibilities they offer in terms of concealing money via trusts. These constructions are often much more confidential than the famed Swiss bank secrecy.’
