THE GOVERNMENT could receive a £9bn boost to its tax receipts over the next four years, thanks to better-than-expected returns from a clampdown on offshore tax evasion.
Dave Hartnett, permanent secretary for tax (pictured), said that a tax disclosure scheme with Liechtenstein – which allows UK taxpayers with undeclared assets in bank accounts in the tiny European principality to pay a reduced penalty in return for coming clean on their finances – has been more popular than originally expected.
Hartnett said that the Liechtenstein Disclosure Facility [LDF], which was introduced in 2009, could raise up to £3bn by 2015 – a leap above the original estimate of £1bn.
Britons with cash hidden in other offshore finance centres have transferred their money to Liechtenstein in order to take advantage of the unique deal, which charges a fixed penalty of 10% on undeclared investments – significantly lower than normal penalties.
In addition, taxpayers using the LDF are only liable for tax owed on income dating back ten years, rather than the usual 20 years.
“Some in the media are saying that the results from the [LDF] are smaller than they thought, but that’s just not right,” Hartnett told Accountancy Age.
“Getting on for 1,200 people have now come forward through the Liechtenstein disclosure facility and there is more than four years to go.”
He added: “The people who have come forward are changing their ways and getting peace of mind, and are getting a good deal on penalties. We are getting money for the exchequer.”
Meanwhile, government ministers will soon begin discussions with the Swiss government to agree a “withholding” tax to be levied on Britons with undeclared income in Swiss bank accounts.
The talks come after the UK and Switzerland signed a joint declaration last October to work towards sharing information on tax issues. A withholding tax, which would make Britons with Swiss bank accounts pay tax on the interest they earn, would be a significant boost for HMRC’s push against on tax evasion.
The tax would require Swiss banks to collect a percentage of the tax owed from the interest on the money earned in their accounts on behalf of HMRC.
The tax, which the UK government hopes to agree in principle by as early as April, could net the Treasury between £3bn to £6bn within a couple of years, according to experts close to HMRC.
Hartnett declined to reveal the likely rate of the withholding tax, but sources suggest the tax rate on income and capital gains hidden in the Swiss bank accounts would probably be between 25% and 35%.
Under this system, a British taxpayer living in London who has hidden £1m in a Swiss bank account would pay between £250,000 and £350,000 in withholding tax.
After paying the tax, the taxpayer would be unlikely to be prosecuted or taxed further on the money.
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