Govt bid to collect tax from Swiss accounts fail

Guardian News and Media/London

The Treasury’s attempt to tax wealthy individuals who hide their assets in Switzerland was declared an embarrassing failure by experts yesterday 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.

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 (£347mn) 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 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.

A withholding tax on future gains and income of up to 43% was expected to rake in £610mn in 2014-15 and £920mn 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.

“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 rival UBS will pay a little over that level.

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.