The UK Government is 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.