News Article Published 24 August 2011 via News Distribution Service for Government and Public Sector.

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News Article Published 24 August 2011 via News Distribution Service for Government and Public Sector.

Excerpt from news article

Agreement with Switzerland to secure billions in unpaid tax

24 August 2011 18:37

HM Treasury (National)

HM Treasury

The Government is today initialling an historic agreement with Switzerland to tackle offshore tax evasion. The agreement will resolve the long-standing abuse of Swiss banking secrecy by those who seek to conceal the proceeds of tax evasion and is expected to secure billions of pounds of unpaid tax for the UK exchequer from 2013.

Under the terms of the agreement, existing funds held by UK taxpayers in Switzerland will be subject to a significant one-off deduction of between 19% and 34% to settle past tax liabilities, leaving those who have already paid their taxes unaffected. As a gesture of good faith Swiss banks will make an up-front payment from Switzerland to Britain of CHF 500m.

From 2013, a new withholding tax of 48% on investment income and 27% on gains will ensure the effective future taxation of UK residents with funds in Swiss bank accounts. This will be accompanied by a new information sharing provision which will make it easier for HM Revenue and Customs to find out about Swiss accounts held by UK taxpayers. The new charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC.

The agreement with Switzerland is the latest step in HMRC’s crackdown on offshore tax evasion, which includes the agreement of the Liechtenstein Disclosure Facility, the creation of a new dedicated team of investigators to catch those hiding money offshore and ongoing work to put in place information sharing arrangements with other countries.

George Osborne, Chancellor of the Exchequer, said:

Tax evasion is wrong at the best of times, but in economic circumstances like this it means that hard-pressed law-abiding taxpayers are forced to pay even more. That is why this Coalition Government made it a priority to go after those who don’t pay their fair share. We will be as tough on the richest who evade tax as on those who cheat on benefits. The days when it was easy to stash the profits of tax evasion in Switzerland are over.

David Gauke, Exchequer Secretary to the Treasury, said:

I am delighted that, through our constructive discussions with the Swiss Government, we have secured the best possible deal for UK taxpayers. This historic agreement will enable us to collect billions of pounds from those who have for too long evaded their responsibility to pay UK tax by abusing Swiss banking secrecy. The message is clear: there is no hiding place for tax cheats.

Dave Hartnett, Permanent Secretary for Tax at HMRC, said:

The world has changed for tax evaders. A few years ago, nobody would have anticipated that we would conclude an agreement with Switzerland to tackle tax evasion. However, with the clear wish of Switzerland as well as the United Kingdom to ensure that tax is paid as it should be, we are embarking on a new course which preserves important principles for each jurisdiction, and will be fair for all UK taxpayers. Our strategy is working. We will secure significant sums of tax that some had thought we would never see. Not only does this agreement settle past liabilities and make arrangements to secure correct taxation in the future, it also gives HMRC more scope to find out about Swiss accounts.

The agreement is expected to come into force in 2013, following scrutiny by Parliament and after ratification procedures in Switzerland are complete.

Notes for Editors

1. The agreement will be initialed (i.e. ratified in principle) today in Zurich by Dave Hartnett, Permanent Secretary for Tax at HMRC and Michael Ambuehl, Swiss State Secretary. It is expected to be formally signed in the coming months. It will then go through Parliamentary and administrative procedures before being signed later in the year. The full text will be published at the time of signature.

2. UK and Swiss ministers issued a joint declaration on 25 October 2010 agreeing to start negotiations on co-operation in tax matters. This agreement is the result of those negotiations.

3. Accounts held by individual UK taxpayers in Switzerland will be subject to a one-off deduction in 2013, as long as the account was open on 31 December 2010 and is open on 31 May 2013. This deduction will settle income tax, capital gains tax, inheritance tax and VAT liabilities in relation to the funds in the account. The deduction will not be applied if the account holder instructs the bank to disclose details of the account to HMRC. Following that disclosure, HMRC will seek unpaid taxes with relevant interest and penalties.

4. From 2013, income and gains arising on investments held by individual UK taxpayers in Swiss banks will be subject to a new withholding tax. The rates of this withholding tax will be very close to the top rates of UK tax. Payment of the withholding tax will satisfy UK tax liabilities on the income and gains. Again, the withholding tax will not apply if the account holder authorises disclosure of details of income and gains to HMRC and pays any associated taxes here.

5. A powerful new provision will allow HMRC to discover whether an individual UK taxpayer has an account in Switzerland. This power is in addition to, and goes further than, the provisions for information exchange under the UK-Switzerland Double Taxation Agreement.

6. UK taxpayers with Swiss accounts will be contacted by their Swiss financial institution in due course.

7. The Lichtenstein Disclosure Facility (LDF) is unaffected by this proposed agreement.

8. The UK has led international efforts to tackle offshore tax evasion, playing a prominent role in the Global Forum on Tax Transparency and Exchange of Information and signing 20 new information sharing agreements since the start of 2010.