UK-Swiss Tax Agreement is Flawed

October 26, 2011 Taxation in SwitzerlandTaxation in UK

Tax Agreements with the UKLONDON – The tax deal between the UK and Switzerland is coming under fire as public campaigners claim that the agreement is rife with loopholes.

On October 25th the international anti – tax evasion group the Tax Justice Network (TJN) published a new report condemning the recently signed tax agreement between Switzerland and the UK. According to the TJN, the new agreement will not lead to any significant reductions in tax evasion, and could even help some taxpayers to better hide their illicit tax schemes.

The TJN claims that it has identified 10 glaring loopholes in the already signed tax agreement between Switzerland and the UK. These oversights will seriously undermine the legitimacy of the deal, and will ultimately prove to be of little, if any, benefit to the UK.

Under the agreement, UK taxpayers who hold Swiss bank accounts will be face a onetime tax of up to 34 percent of the value of their bank account, followed by an annual tax of 48 percent on all future incomes.

According to the report, taxpayers wishing to circumvent the new rules could simply transfer their assets to a foundation, discretionary trust, or a company with commercial activities, all of which are not covered under the agreement in respect to future incomes. Further, bank accounts held at branches of Swiss banks outside of Switzerland are also not subject to the agreement. Account holders could also simply declare their deposits as “non-capital” incomes such as wages or directors’ fees.

The HMRC initially estimated that the new agreement could result in tax collections of up to GBP 7 billion. However, the TJN says that once bank account holders make use of the available loopholes the tax revenues will only be approximately 10 percent of the first forecasts.

Photo by HowardLake

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