No room for neutrality in Swiss debate

AS A tax journalist, it makes me feel uncomfortable defending HMRC. But, like the PAYE reports last week, HMRC does have to put up with an awful lot of misreporting. It’s not as though there are not enough genuine criticisms around, after all.

This week, the beleaguered taxman has to face yet more criticisms of the Swiss tax deal, this time from the Tax Justice Network. It identified several loopholes, such as the use of discretionary trusts and insurance wrappers.

These claims might have some merit, but a more detailed analysis is required. But even if the claims are correct, they do not lead to the conclusion – that the deal is bad for the UK.

The deal has to be looked at in two ways: first, that the evaders will not like it, despite reports to the contrary. The most aggressive evaders will find ways around the deal, most likely through moving their money to another jurisdiction or arrange the account in a different way. Neither of which is preferable to doing nothing. Crucially, if they do attempt to avoid the charges, they will not be protected by the provisions – they will still be fair game for the Revenue. They will have gained nothing but the requirement to make their arrangements that little less secure than they were in pre-deal Switzerland.

Second, any money brought in will be extra money for the Exchequer, which is not a bad thing.

The TJN report claims that more money would have been brought in had the UK continued pushing the EU Savings Directive. But it adds: “Although the original directive is full of loopholes and has only collected a small fraction of the originally envisaged sums, it is a long-term work in progress.”

So why will the new directive be any different? And why does the TJN not look at bilateral deal from a long-term perspective?

This is part of a worldwide effort to tackle avoidance. Now it’s Switzerland, tomorrow it will be Singapore, then Bermuda. This is simply one link in a chain, a link that is generating money on the side. The most determined evaders will run when they are chased, but this is true with whatever mechanism is used to increase transparency. Eventually, human nature dictates that the majority will tire of running.

The TJN, HMRC and 99% of the population are on the same side – we all want the wealthy to pay their fair share. This is the way HMRC think is the best way to collect revenue from Switzerland and to take forward the worldwide fight against evasion: and they have put a convincing case forward.

Ironically, some of the only people who are not on the same side are probably the Zurich tax advisors, who form a large part of the sources quoted in the report…

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