In the second deal of its kind signed inside just one month, Switzerland has agreed to hand over tax revenue to the British tax authorities on the account balances held by UK resident Britons with Swiss offshore assets. So does this mean that Switzerland is no longer a tax haven that expatriates can trust?
In the past the jurisdiction has been favoured by those seeking maximum privacy and security for their assets – and as we will now show, that status hasn’t actually been eroded by either of the deals signed by the Swiss authorities in August, (the first with Germany, and the latest with HMRC in the UK).
Switzerland is simply working with the global guidelines for the eradication of tax evasion, rather than destroying its excellent reputation for privacy and secrecy. Expatriates with legitimate account holdings in Switzerland don’t therefore need to be concerned that the tax haven is losing its status as a superior jurisdiction for offshore banking assets.
Switzerland signed what was seen as a landmark tax agreement with Germany at the start of the month. Under the terms of the agreement Switzerland contracted to levy a penalty on accounts held locally by onshore resident Germans, and to apply a withholding tax on their future interest and capital gains.
The money they raise will be handed directly to the German tax authorities – but the names of the account holders will not be revealed.
Yesterday a very similar deal was struck between the Swiss authorities and HM Revenue and Customs. Under the terms of the deal a one off tax grab will be made on all accounts held by those who are believed to be British residents and who have accounts in Switzerland.
It’s estimated that the tax grab could net the Treasury up to £5 billion. This grab will take place in 2013 – but the Swiss have agreed to make an upfront payment of 500 million francs to the UK Treasury in the meantime.
Going forward, from 2013 the Swiss will apply a withholding tax of 48% on investments and 27% on gains, where their records indicate that the account holder should be liable for British taxes.
The Guardian has suggested that this ends Switzerland’s reputation as a tax haven. We disagree. It ends the ability of resident Britons to exploit Switzerland for their illegal tax evasion activity…but it does not remove Switzerland’s reputation as a private and secret jurisdiction for those seeking the superior management of their banked or invested assets.
Under the terms of the agreements in place with Germany and the UK, Switzerland will not be handing over the personal details of any of the account holders – even though they are suspected of illegal tax evasion activity. There are many who believe that this is absolutely wrong, but this is not the platform for the exploration and expansion of that argument.
What this element of both agreements does do however, is cement Switzerland’s status as one of the most secret offshore tax havens in the world.
Quite possibly its financial strength has meant that it has seized the opportunity to secure these deals at a time when the likes of the UK and Germany are exceptionally financially vulnerable. In putting these deals in place, Switzerland has shown itself to be combating tax evasion – and therefore adhering to the global clampdown on illegal tax avoidance activity.
What is has not done is agree to expose suspected tax cheats. By managing to retain absolute customer confidentiality even when those customers are suspected of illegal activity, Switzerland has ensured that it can maintain customer confidentiality for all. I.e., any expatriate legitimately banking and investing in Switzerland needn’t be concerned by the deals struck in August, because if anything they will ensure that Switzerland remains one of the most secure, secret and private offshore tax havens in the world.