THE TAX DEAL between the UK and Switzerland may not yield the expected £3.2bn, the campaign group Tax Justice Network has warned.
An accord struck between the two countries in April last year forms part of an attempt by the UK to retrieve around £125bn in tax held in the secretive banking system globally and sees accounts held by individual UK taxpayers in Switzerland subject to a one-off deduction in 2013, as long as the account was open on 31 December 2010 and on 31 May 2013.
Under the scheme, income and gains derived from investments held by UK taxpayers in Swiss banks will be subject to a withholding tax, with the rates comparable to the top UK rates and payment satisfying UK liabilities.
The withholding tax will not apply if the account-holder authorises disclosure of details of income and gains to the taxman. However, should they fail to disclose their affairs fully and pay, penalties of up to 150% of the amount owed could be imposed.
The Swiss authorities handed over £340m to HM Revenue & Customs as part of the deal in January, with more expected to follow according to the chancellor.
George Osborne (pictured) hailed that development at the time as the first time “that money due in taxes has flowed from Switzerland to the UK”, adding the it was “very welcome”.
However, in a statement published on the Tax Justice Network’s blog, the campaign group said “giant loopholes” existed in the deal before going on to claim that some of them had been “deliberately inserted”. Those loopholes, it said, mean only a fraction of the original target would make its way into the British public purse.
According to Swiss Bankers Association (SBA), most Swiss accounts held by British nationals do not fall under the scope of the deal as they are not domiciled in the UK. That, said the network, calls into doubt the £3.2bn expected by the Treasury over the next five years.
“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 wrote.
But a spokewoman for the Treasury said there is no reason to revise the projected revenue from the deal.
She said: “As the SBA has said, more people have chosen to disclose their tax affairs to HMRC than expected so the yield from this route is likely to be higher than anticipated.”
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