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Tax avoidance: UK effort to collect from assets hidden in Switzerland fails Tax avoidance: UK effort to collect from assets hidden in Switzerland fails
(about 2 hours later)
The Treasury's attempt to tax wealthy individuals who hide their assets in Switzerland was declared an embarrassing failure by experts on Friday after the Swiss authorities said it would generate only a small fraction of the expected £3.2bn haul.The Treasury's attempt to tax wealthy individuals who hide their assets in Switzerland was declared an embarrassing failure by experts on Friday after the Swiss authorities said it would generate only a small fraction of the expected £3.2bn haul.
The Tax Justice Network campaign group said "giant loopholes" in the deal struck by the Treasury minister David Gauke and the former HMRC chief David Hartnett had undermined the UK's attempt to trawl the Swiss banking system for untaxed funds.The Tax Justice Network campaign group said "giant loopholes" in the deal struck by the Treasury minister David Gauke and the former HMRC chief David Hartnett had undermined the UK's attempt to trawl the Swiss banking system for untaxed funds.
According to the Swiss Bankers Association (SBA), the deal does not apply to most UK nationals who keep their cash in Swiss banks because they are not domiciled in Switzerland.According to the Swiss Bankers Association (SBA), the deal does not apply to most UK nationals who keep their cash in Swiss banks because they are not domiciled in Switzerland.
The SBA said banks would pay the minimum levy agreed with the UK of CHF500m (£347m) after individual banks found only small sums from UK citizens were caught by the deal. The SBA said the UK may get little more than a CHF500m (£347m) minimum levy agreed with the UK after individual banks found only small sums from UK citizens were caught by the deal.
The Swiss declaration is not only embarrassing for the Treasury, it also knocks a sizeable hole in public finances as the Office for National Statistics controversially included the £3.2bn levy in May's public accounts. The Swiss declaration is not only embarrassing for the Treasury, it also This knocks a sizeable hole in public finances as the Office for National Statistics controversially included the £3.2bn levy in May's public accounts.
The levy contributed to a narrowing of government borrowing from £15.6bn in May 2012 to £12.7bn.The levy contributed to a narrowing of government borrowing from £15.6bn in May 2012 to £12.7bn.
The Swiss bank Credit Suisse said it found just CHF90m following a review. The bank will contribute the money as part of a withholding tax agreement between the two countries which came into force this year.
According to the Treasury's red book, which forecasts tax revenues over the next five years, a one-off levy on Swiss assets owned by UK residents, ranging from 21% to 41%, was due to raise £3.2bn in this tax year.According to the Treasury's red book, which forecasts tax revenues over the next five years, a one-off levy on Swiss assets owned by UK residents, ranging from 21% to 41%, was due to raise £3.2bn in this tax year.
A withholding tax on future gains and income of up to 43% was expected to rake in £610m in 2014-15 and £920m in the following year. Much of that income must now be in doubt, the Tax Justice Network said.A withholding tax on future gains and income of up to 43% was expected to rake in £610m in 2014-15 and £920m in the following year. Much of that income must now be in doubt, the Tax Justice Network said.
Coming only a year after the government cut the top rate of tax from 50p to 45p, the campaign group said the deal was a huge giveaway to wealthy UK nationals able to hide their assets in tax havens.Coming only a year after the government cut the top rate of tax from 50p to 45p, the campaign group said the deal was a huge giveaway to wealthy UK nationals able to hide their assets in tax havens.
"The Swiss withholding tax model is now dead. Dave Hartnett, David Gauke and the government that sanctioned this deal must now hang their heads in shame," it said."The Swiss withholding tax model is now dead. Dave Hartnett, David Gauke and the government that sanctioned this deal must now hang their heads in shame," it said.
Credit Suisse said it would bear 20% of the total cost, while its rival UBS will pay a little over that level. A spokesman for the SBA, which lobbies on behalf of all the major Swiss banks, said the deal was proceeding and it was too early to predict how much money would be declared to the Swiss and UK tax authorities, though it was already clear fewer untaxed assets than expected had come to light.
The SBA, which lobbies on behalf of all the major Swiss banks, said the deal was proceeding, but added in a statement that it had discovered fewer untaxed assets than expected.
"This is mainly due to the fact that many clients have resident non-domiciled status. These clients are not liable to taxation in the UK and thus do not fall under the agreement," it said."This is mainly due to the fact that many clients have resident non-domiciled status. These clients are not liable to taxation in the UK and thus do not fall under the agreement," it said.
The SBA said numerous UK clients had chosen to make voluntary disclosures to the tax authorities, which the association said was not surprising given Switzerland's announced adoption of a global standard for the automatic exchange of information.The SBA said numerous UK clients had chosen to make voluntary disclosures to the tax authorities, which the association said was not surprising given Switzerland's announced adoption of a global standard for the automatic exchange of information.
It is not clear how much the Treasury has received directly from UK citizens who opted to make a voluntary disclosure of their tax position, but tax experts said it was unlikely to make a material difference to the shortfall.It is not clear how much the Treasury has received directly from UK citizens who opted to make a voluntary disclosure of their tax position, but tax experts said it was unlikely to make a material difference to the shortfall.
The Treasury was unavailable for comment. But a Treasury spokeswoman said there was no reason to revise the estimated revenue from the deal.
She said: "As the SBA has said, more people have chosen to disclose their tax affairs to HMRC than expected so the yield from this route is likely to be higher than anticipated."
Philip Inman