Liechtenstein reaction: tax agreements are ineffective

Agreements struck between Liechtenstein and the government to share tax data
on bank account holders has been met with shock and some indignation by the tax
and human rights communities.

PKF warned that the opportunity to limit tax penalties for UK citizens with
Liechtenstein bank accounts was ‘wholly unfair’, due to the difference in terms
between that and the current tax amnesty running in the UK.

The Liechtenstein tax deal offers account holders the opportunity to settle
any unpaid tax with only a 10% penalty and going back only as far as ten years.
In contrast, the NDO set to begin in September this year, is asking UK taxpayers
with investments in other offshore jurisdictions to declare unpaid tax as far
back as 20 years. In some cases they may also have to pay a 20% rather than a
10% penalty.

John Cassidy, tax investigations partner at PKF, said: ‘It is wholly unfair
that there are different rules for those with investments in Liechtenstein and
those with investments in other offshore jurisdictions.’

Andrew Watt, MD of tax disputes and investigations at Alvarez & Marsal
Taxand, said: ‘This is a seismic event and is just unbelievable. I’d never
thought I’d see the day these initiatives would happen.’

‘This amnesty provides a good option for those with a disclosure to make as
they will benefit from a much more favourable penalty. If they ignore this
opportunity, they will face a much steeper penalty, which will be increased due
to litigation costs should prosecution result.’

Christian Aid, the charity organisation, criticised the effectiveness of
cross-border tax agreements.

‘The fact that the UK has signed two agreements today – a TIEA and a second
one, ensuring that uncooperative UK taxpayers have their Liechtenstein accounts
shut down – is a clear sign that TIEAs are almost impossible to use,’ said
Christian Aid policy manager Alex Cobham.

‘They are extraordinarily bureaucratic and riddled with get-out clauses,’
Cobham claimed in a statement. ‘If TIEAs were an effective way for tax
authorities to combat tax dodging, then there would have been no need for the
second agreement.’

Further reading:

Historic Liechtenstein tax deal
branded ‘unfair’

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