With the current economic downturn now starting to bite at Governmental level (e.g. Greece, Ireland, Italy, Spain and Portugal to name but 5), it is not surprising the HMRC has been throwing significant resource and importance into flushing out tax evaders.
An initial Agreement (which could be subject to change) has recently been reached with the Swiss authorities, who historically have been one of the most secretive of banking nations – but with AccountancyAge.com calling it “ground-breaking”, will a new withholding tax of 48% on income or 27% on capital gains really warrant a sea-change in the actions of those individuals that have unilaterally decided not to pay tax? Despite an agreed up-front payment of CHF 500m “as a gesture of goodwill”, will it really generate the anticipated £3-5bn a year that some commentators have quoted? This is a massive amount of tax.
The agreement, which actually doesn’t come into force until 2013, does not appear to guarantee any form of immunity from prosecution for those who do decide to play ball and come forward. Contrast this with say the Liechtenstein Disclosure Facility which does guarantee immunity and still has 3-4 years left to run.
Whilst this Agreement is not a Swiss version of its near neighbour, we suspect those individuals that are weighing up their options could well simply view this as a numbers game and look at the relative tax cost of coming forward. As far as we can see there is no mention of what sort of settlement an individual could expect and over what period that agreement would cover – for example, would it be the 20 years that HMRC could look at or possibly only those from 1999 onwards that the LDF caters for?
Why does the Agreement only commence in 2013?
Would this not offer the serious evader who is happy to continue rolling their dice, an opportunity to move their affairs to another jurisdiction that have yet to sign up to such an agreement – say Singapore, Dubai or Hong Kong?
The Agreement does have some interesting angles with regard to the disclosure of information. Under the terms of the Agreement the Swiss have agreed to supply details to HMRC of the 10 most popular locations that any funds moving out of Switzerland have gone to. Hardly likely to deter the serious tax avoider?
The deal gives HMRC the right to request information on up to 500 accounts a year to allow them further investigation. It will be interesting to see how HMRC apply this – whether it will be targetted based on information or merely used as part of more general fishing exercises. Presumably the former?
We recognise that the wording of agreements with other nations is a difficult exercise and has to balance the particular needs and wishes of each country, but we do wonder where the “teeth” are in this Agreement and fear that rather than bring in the £m’s that HMRC anticipate, it will simply encourage those individuals in the headlights to move on to another jurisdiction – in fact, those of a certain age may well remember The Incredible Hulk – no, not HMRC turning Green…but it could be rather akin the ending which saw Bill Bixby simply pack his bags and move on to the next place, never quite knowing what was in store, where he would end up…or whether the investigative reporter (Mr McGhee) would ever catch him!!