Britons to be taxed on secret billions

http://www.ft.com/cms/s/0/6b4f2fb2-74da-11e0-a4b7-00144feabdc0.html#axzz1LHRJ6FUo

SS says 


This will end up being negative for the UK.


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Britons with billions of pounds hidden in Switzerland will pay tax at 50 per cent under a groundbreaking deal that will legitimise their undeclared assets, according to a source familiar with negotiations between the Swiss and British governments.

The agreement, which is expected to be announced this month, marks a shift in emphasis in the international crackdown on tax havens. Over the past two years, the focus has been on lifting bank secrecy and exposing evaders.

Under the deal, £3bn is expected to be raised over the course of this parliament and investors will also pay a one-off retrospective levy in recognition of past unpaid tax.

The move by the Swiss authorities to “regularise” hidden accounts by taxing them on behalf of the UK government is a sign of the intense pressure they have faced from cash-strapped foreign governments angered by the role of Swiss banks in facilitating evasion.

Britain’s willingness to legitimise secret accounts on a “no names” basis is likely to be controversial because it will treat users of secretive havens more leniently than other taxpayers and because it tacitly accepts limits in the drive towards more transparency. But it will be welcomed in some quarters as a pragmatic move to collect revenues from investors who were unlikely ever to be exposed.

It has sparked complaints from Liechtenstein, the former tax haven, which says the Swiss negotiations have damped take-up by investors of an amnesty it negotiated with Britain two years ago. The UK Treasury is considering extending the Liechtenstein disclosure facility by a year, to 2016, as it recognises the uncertainty over the Swiss deal may have inhibited evaders from coming forward.

The imposition of a 50 per cent withholding tax on in-come from Swiss accounts is in line with the goals announced by the UK and Swiss governments last October when they said they were “striving towards co-operation which will have an effect equivalent to the outcome which would be achieved through an agreement to exchange information automatically”.

Switzerland has repeatedly rejected calls to provide tax information automatically to other governments. “This only yields data and unnecessarily impairs the aspect of privacy,” it said in a government report in January.

This week the talks are due to move into the final phase, focused on improving market access for Swiss banks. The deal, to be formalised at the end of the year after approval by Swiss referendums, is similar to one being negotiated with 

Germany.

The issue of market access was thought to concern the recruitment of British clients by Swiss banks that did not have a regulated subsidiary in the UK. Even though market access was a bigger issue in Germany, Switzerland required a concession from the UK to reciprocate for the withholding tax.

Andrew Watt, managing director with Alvarez & Marsal Taxand UK, said Switzerland’s willingness to negotiate a deal of this type would have been unthinkable two or three years ago. He said: “However inadequate the agreement, even if it is just a small chink of light, it is still astonishing.”

The European Commission has sought assurances that the UK and Germany remain committed to its effort to improve transparency by encouraging automatic exchange of information in a revised version of the 2005 European savings directive. Last November, Algirdas Semeta, the tax commissioner, stressed the limitations of withholding taxes, saying that “such a withholding tax may generate some revenue, but it does not allow member states to assess the overall tax base of their residents”.

Some individuals hiding money in Switzerland are expected to consider moving their money after the deal to alternative financial centres including Singapore, Hong Kong, Dubai and the US. But the number of safe havens for undeclared money has shrunk as a result of the imposition of anti-money laundering rules and the dismantling of strict bank secrecy rules by the G20 two years ago.