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The Tax Justice Network has identified 10 tax loopholes in the agreement signed by UK and Switzerland governments on 6 October 2011…

Dave Hartnett, HM Revenue and Customs (HMRC) Permanent Secretary of Tax, said in an interview with the Chartered Institute of Taxation (CIOT) on 30 September 2011 that the UK-Swiss withholding tax agreement was expected to raise £4bn – £7bn.

Hartnett’s prediction looks unlikely as the Tax Justice Network, an independent tax and regulation campaign group set up in March 2003 by the British Houses of Parliament, has identified 10 tax evasion loopholes which will allow UK holders of Swiss bank accounts to evade HMRC’s new rules.

Hartnett is not having the best time of late; he has recently been under fire by MPs for lying about his involvement in Goldman-Sach’s tax affairs and a deal that left £10m interest unpaid by the Wall Street bank.

Protesters from direct action group UK Uncut and anti-capitalist campaigners Occupy London also joined forces on 24 October demanding Hartnett’s resignation from HMRC due to his suspected £6bn tax avoidance deal with mobile giant Vodafone.

The fact it now looks unlikely that the UK-Swiss deal will bring in the predicted £4-£7bn for the Revenue, Hartnett is bound to be feeling public embarrassment and pressure to resign.

Some of the tax evasion loopholes that have been uncovered by the Tax Justice Network include:

Discretionary trusts, often used by wealthy tax evaders, would make it beyond the bounds of possibility to identify the owner of assets in question.
UK taxpayers who set up their own commercial, manufacturing or trading operations will evade the new tax rule.
The UK-Swiss deal only concerns Swiss bank branches that are located within Switzerland – UK holders of Swiss bank accounts can transfer their assets to a branch located in another country to fall outside new tax rules.
Financial advisors have 17months until the new rules apply in May 2013, which allows plenty of time to advise UK clients of where to move their Swiss assets and avoid paying the new ‘withholding’ tax.
The Tax Justice Network has said that Hartnett’s ‘major over-estimation’ has ‘misled’ the British public, and argue that loopholes discovered in the Swiss-UK tax evasion deal will in-fact reduce tax taken from UK individuals with assets currently held in Swiss bank accounts.

The director of Tax Justice Network, John Christensen, said:

“It’s hard to see how the British public will benefit in any way from this flawed agreement.

“Worse it will reverse years of progress made by the EU towards tackling tax evasion through automatic information exchange.

“It is impossible to see how the HMRC can describe this deal as being in Britain’s interests.”

HMRC have defended supposed ‘flaws’ in the UK-Swiss agreement and said:

“The Swiss agreement will deliver billions of pounds to the UK that would otherwise have been lost. It will deliver significantly more than under the EU agreement with Switzerland.

“Anyone who takes money out of Switzerland rather than paying the tax would be taking a big risk, facing penalties that wipe out the advantage of going offshore in the first place and potential criminal prosecution.

“The agreement does not prevent our use of information we obtain outside a formal information exchange agreement.”

The Revenue has taken countries looking to sign similar deals with the Swiss government in a positive light and as a good sign of things to come.

Kevin Kinsella Jnr, of KinsellaTax, said:

“I can expect similar deals between governments that offer tax haven secrecy to be adopted by other countries following the signing of a deal between the UK and Switzerland.

“However, wealthy tax evaders with assets in Swiss banks who try one of these ten tax evasion deal loopholes should be aware that it will only be a matter of time before HMRC search again for their ‘hidden’ assets.

“There is of course the ability to transfer money to Liechtenstein through making use of the LDF facilities. The other problem HMRC has is that tax advice is a multi-billion industry and as HMRC close one down another one seems to be open.

“Perhaps ones should now take notice of the proposals put forward by the Institute of Fiscal Studies for a new tax system.”

For more information on tax evasion please click here.

Do you have money held in offshore bank accounts in Switzerland?

If yes, you need a tax investigation expert who can handle your tax evasion case for you.

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