After an intense investigation by the IRS, the United States Department of Justice (DOJ) pursued both criminal and civil charges against the giant Swiss bank. Federal prosecutors dropped criminal charges eighteen months later, however, after the bank admitted to fraud and conspiracy, paid a $780 million fine, and satisfied DOJ prosecutors that it had dismantled its offshore banking operations.

In August 2009, UBS agreed to a settlement with DOJ on the civil charges and as part of the deal, offered to hand over the names of 4,450 tax evading Americans to the IRS. For a moment, it looked like the Swiss government—in a grasping act of self-preservation—would step in and forbid UBS from handing over the names. But at the last minute, the two houses of Swiss Parliament agreed to stick to the deal.

The historic vote laid the groundwork for more legal action by the United States against several other Swiss banks—likely what the Swiss had feared.  These included Credit Suisse, Switzerland’s second largest bank, and HSBC, which is based in London, but has extensive Swiss operations under its Private Bank. There are now at least eleven Swiss banks under criminal investigation by the Justice Department’s tax division.

But DOJ’s approach and tone has shifted in recent months. Early last week, for the first time ever, “U.S. authorities have charged a bank rather than individuals with helping Americans evade taxes.” The bank was Wegelin & Co.; it is Switzerland’s oldest private bank.  According to the indictment filed last week, Wegelin helped Americans evade U.S. taxes on more than $1.2 billion in assets and after DOJ’s prosecution of UBS, “deliberately set out” to capture its counterpart’s lost cross-boarder illegal banking business.

Bryan Skarlatos, an attorney with Kostelanetz & Fink in New York, noted the indictment ”shows the [United States] is willing to go after Swiss banks themselves if they don’t turn over names of U.S. taxpayers who are account holders.” It also puts pressure on the Swiss government to agree to a settlement involving all Swiss banks.

In many ways, Swiss banks have born the largest share of DOJ scrutiny on tax evasion. The reason for that is relatively clear—Switzerland holds nearly one-third of the estimated $7 trillion in global wealth kept offshore.

But what about the other two-thirds? Switzerland is not the only place in the world to hide tax-evading money.  Some spooked depositors are sending it somewhere even more secretive, like Singapore, Hong Kong, and the United Arab Emirates. So should—and by extension—when should the DOJ pursue banks in other jurisdictions as aggressively as it has in Switzerland?

Prosecutors are already investigating banks in Asian jurisdictions. None have seen the level of DOJ involvement with Switzerland, but that doesn’t mean they’re safe. Nor should they be. As long as these banks continue to aid American citizens violate American laws, they should be held accountable. While Switzerland may hold a bulk of the world’s offshore tax-evading deposits, if DOJ pursues only the Swiss, they risk pushing the deposits to other, more secretive havens. So the answer is yes: DOJ should pursue tax evaders in other countries. And they should probably do it soon.

The other powerful statement to come out of the meeting in Cannes was from French President Nicholas Sarkozy, who had some very strong words for uncooperative low tax jurisdictions. Sarkozy intonated that a list of eleven uncooperative jurisdictions should be “excluded from the international community,” including: Barbados, Trinidad and Tobago, Antigua, Botswana, Brunei, Panama, Seychelles, Uruguay, Vanuatu, Switzerland and Liechtenstein. He added that a list of countries which do not conform to acceptable tax practices would be published at all future G20 summits. “We don’t want to have tax havens any more.” He said “Our message is very clear.”

Loud and clear, sir.

The countries on Sarkozy’s list have reacted with varying degrees of hostility, indigence, and feigned bewilderment. In Barbados, for instance, the Minister of Foreign Affairs and Foreign Trade Maxine McClean insisted that “Barbados is a low-tax jurisdiction…not a tax haven.” Well, sure, you can label it any way you want, but the fact remains that Barbados surrounds its banking sector with a shroud of obscurity and will not participate in automatic tax information exchange. And for the record, yes, it’s also a tax haven.

There were also reactions from some jurisdictions that did not appear on Sarkozy’s list. This included Isle of Man, a British Crown Dependency and a tax haven according to the OECD. Or if that’s not compelling enough evidence, see this eHow article, titled “How to Avoid Tax with an Isle of Man Bank Account.” That’s not a joke. Needless to say, Isle of Man felt a wash of relief when Sarkozy didn’t call its name. Chief Minister Alan Bell called the news a “major step forward,” noting the statement was “very good” for the Island’s reputation. Okay. Sure. It’s just not saying much when your definition of “very good” is “not being ostracized by the world community.”

It was Switzerland, however, that reacted the strongest and most indignant. A spokesman for the Swiss State Secretariat for International Financial Matters told the world that they “were very surprised and dissatisfied.” This year’s Swiss president, Micheline Calmy-Rey, called Sarkozy’s remarks “ungrounded” and hypothesized that Sarkozy must have “a problem with Switzerland.” Calmy-Rey added that she did not know what this problem could be.

Okay. What could that problem possibly be? Here’s a thought. Maybe it has something to do with your country helping citizens of other countries, like France, avoid and evade their taxes. But that’s just the first thought that sprung into my head. I guess it could be something else, too.

• Swiss-U.K. Tax Agreement May Be ‘Revenue-Negative,’ Group Says – Bloomberg
• Swiss tax deal could end up costing UK – Guardian
• ‘Fatal flaws’ in UK-Swiss tax deal attacked – Financial Times
• Revealed: Loopholes in Swiss tax deal mean £7bn windfall could be lost – Bureau of Investigative Journalism.
• Rubik agreements with Switzerland draw barrage of criticism - Europolitics
• EU-tax deals in danger 20 min (rough web translation here)
• EU tax chief flags up Swiss deals Swiss Info

We are told that we also got a good discussion on the BBC’s flagship Today programme yesterday.

Of course (of course!) we have had some predictably lame responses to it. The first thing we note is that nobody so far has picked any holes in it, technically speaking. It is early days, of course, and there’s not much space in a newspaper to do so, but we are confident in our analysis.

Let’s start with slipperiest attempt to rebut our story, from the Swiss Bankers’ Association. Here’s the first part:

“There is no legal way for a British person to remain entitled to his or her assets in Switzerland in any way while at the same time evading identification,” Sindy Schmiegel Werner, head of U.K. communications at the SBA, told Bloomberg News.

Now if ever there were weasel words, these are them. Tax evaders can get round this deal by escaping being a ‘beneficial owner’. They can find ways in which they are no longer legally entitled to the asset using the devious structures of offshore – discretionary trusts, insurance wrappers, foundations and so on – while in reality they still control the assets. And hey presto! you are outside the deal’s scope. See Sections 3.1 or 3.2 to get a better flavour of this. It can be difficult to get one’s head around it, at first.

In short, the SBA is deliberately missing the point. They know they are missing the point, but the shame is that many people who aren’t familiar with the devious world of offshore trusts and their like will fall for these words. The next thing the SBA says is even more laughable.

“Banks will not actively support their clients to withdraw their assets from Switzerland”

Right. Of course. We should trust them. And through that word ‘actively’ we will see a coach and horses drive, laden with British taxpayers’ money. We won’t actively support them. But we won’t, ahem, be averse to letting them do this, and we might on occasion whisper in their ears. Or something like that.

In short, this is a laughable set of responses from the SBA, and our study stands intact.

The next point comes from Vanessa Houlder of the FT.

“Much of the disagreement over the merits of the deal revolves around the likelihood of Switzerland ever providing automatic exchange of information.”

Absolutely false. It is important to understand this and get the message out there. First, our analysis is designed to compare like for like: i.e. looking at how Switzerland is currently applying a withholding tax, and drawing conclusions from that. We then write about the European Savings Tax Directive as an almost incidental point: things would be far better if the current proposed amendments – very beefy changes that are currently being undermined by the UK-Swiss and UK-German deals – came into force. But these amendments are most fundamentally about taxation, and less about automatic information exchange. The FT simply misunderstood the whole point.

Next, we have a response from the UK’s HMRC.

“Revenue insiders said the TJN analysis missed the point. If tax evaders chose to exploit loopholes in the deal, sources said, they would remain open to prosecution and huge penalties.”

And they didn’t face prosecution and huge penalties before? What has changed here? Let’s be clear about this. This is not a representative group of the UK taxpayer population. The assets that are in question are the assets of people who have already decided to break the law and evade tax. The fact that instead of facing a 20% withholding tax under the EU Savings Tax Directive – which is only a modest incentive to evade – this deal will face them with a super-massive 20-35% capital charge (see the report for more details) on the absolute value of their capital. The incentive to escape will be massively, massively higher under the UK-Swiss tax deal. Our calculations show beyond reasonable doubt that it is inconceivable that they will raise more than one billion pounds – most likely a small fraction of that. We think it’s unlikely the UK will receive anything beyond the £350 million (500 million Swiss Francs) that Switzerland is due to hand over to the UK in a few days’ time as a down-payment to protect their secrecy.

And if HMRC comes back and says ‘we have expanded co-operation with Switzerland and the possibility of making up to 500 requests per year- just remember than between 2004 and 2010 the UK made an average of less than three requests to Switzerland per year — and Switzerland has made an average of precisely zero spontaneous exchanges of information back to the UK.

Do leopards change their spots? Er, not that much. HMRC’s claims are laughable.

Next, we have had Bill Dodwell of Deloitte, a regular opponent of TJN, dismissing our study. We have just rung up Bill Dodwell but he didn’t answer. We want answers from him: what exactly is it that he objects to?

And if anyone wants to read more on the politics of all this, read this article in Europolitics (though we wouldn’t quite agree with all the technical analysis, the politics is very interesting.) The article starts like this – this is dynamite.

The European Commission is planning to attack the tax agreements concluded by Switzerland with Germany and the United Kingdom, on 25 October in Strasbourg. It finds that Berlin and London have encroached upon the Union’s powers by negotiating bilateral arrangements with Berne that interfere with savings taxation rules.
. . .
Commissioner Semeta plans to take a very hard line and to denounce an abuse of power by Germany and the UK.

Fiery stuff. This happens to confirm Section 4.4 of our analyis. These ‘Rubik’ agreements are a disaster from start to finish. HMRC should simply give in, and cancel them, to save further embarrassment.

Cross-posted with permission from the TJN Blog …

SPD Plans to Block Rubik Ratification in Germany

The SPD’s financial concept note published last Monday rejects the agreement with Switzerland. It is now quite likely that the deal will be rejected by the Upper Chamber, the Bundestat. North Rhine Westphalia’s Finance Minister Walter Borjans argued that effectively giving an amnesty to tax evaders was unconstitutional. Nicolotte Kressl and  SPD finance experts in the Bundestag said the deal should be halted as not to undermine EU efforts to secure automatic exchange of information with Switzerland.

EU to Look into Legality of the Deals

The European Commission is analyzing whether the final withholding tax deals are compatible with EU law. “We had many contacts with Germany and Great Britain, which assured us that their bilateral agreements would not infringe the European directive on savings taxation or the Union’s agreement with Switzerland. We’re going to check all that. It is clear that in the light of international law, the directive and the EU-Switzerland agreement take precedence over the bilateral agreements initialed in August,” EU Taxation Commissioner Algirdas Semeta said to reporters on 8 September. The European Council Working Party on Direct Taxation will meet on 22 September and the commission has requested that Germany and Britain present the full text of their agreements with Switzerland at this meeting.  However, it does not seem that the commission opposes the deals but rather that it might use them to win some small further concessions from Switzerland, either expanding the scope of information exchange on request or bringing in other types of investment.

Luxembourg and Austria did not want to take part in automatic exchange of information as part of the European Savings Tax Directive (EUSTD), so they won an opt-out allowing them to temporarily use a withholding tax method instead. Now Luxembourg is arguing for an extension of this arrangement in the light of the Rubik deals. The EC maintains that the original timetable must be adhered to.

If it wasn’t enough that Swiss banks have already begun to advise UK citizens to move their money to Singapore to avoid the withholding tax. There was another instance of the toothless or complicit approach of the UK authorities to tax dodging. Boilerplate concerns from business about ‘uncertainty’ were enough for the government to drop an evaluation of the UK’s double taxation treaties investigating the opportunities for tax avoidance these agreements often create. Accountants Ernst and Young cheered this saying “The Coalition pledged to take a more consultative approach to tax policy making and, from this volte face, they seem to be living up to their mantra,” i.e hastening regulatory capture and allowing companies to dictate tax policy appears to be an  official British policy.

France entered discussions with Switzerland on Rubik and rejected it for now. Some French officials reasserted their commitment to promote automatic information exchange, however other officials have hinted that the Swiss proposal might receive consideration at some point in the future. In Addition, Alfredo Gysi, head of the Association of Foreign Banks in Switzerland, one of the architects of the final witholding tax proposal, is clearly looking to tempt Italy into a similar deal. On top of vast amounts of flight capital from developing countries, it is estimated that, in total, European citizens hold roughly 700 billion Euros in Switzerland, it can be assumed much of this was never properly taxed.

Tax deal supports financial secrecy

George Osborne says: ‘my message to those who try to hide their incomes from the Revenue in offshore bank accounts and false declarations is simple: we will find you and your money.’

A senior official at the Indian Central Board of Direct Taxes says: ‘money laundering or illegal commission are a criminal offence. So, our effort will be to not just bring back the money but also prosecute the owner.’

President Obama says: ‘if financial institutions won’t cooperate with us, we will assume that they are sheltering money in tax havens, and act accordingly. And to ensure that the IRS has the tools it needs to enforce our laws, we’re seeking to hire nearly 800 more IRS agents to detect and pursue American tax evaders abroad.’

On the face of those statements you would think that the UK, India and the US would take the same approach to tax dodging. However, despite talking tough on tax evaders, George Osborne has broken ranks with countries like the US and India and concluded a deal, branded disgraceful by Christian Aid director Loretta Minghella, that rewards those who have been avoiding paying tax in the UK on wealth held in Switzerland.

The tax deal

The deal requires the Swiss to levy a withholding tax on UK assets held in Switzerland, and the Swiss will pass on the money to the UK. Those holding the assets will pay a lower rate of tax than if they had declared them directly to the authorities in the UK as part of a tax return, and the UK will not be entitled to receive information about those on whom the taxes have been levied.

The upshot is that it rewards those who hide their money in Switzerland, giving them both a discount on their taxes, and allowing them to keep their finances secret. By signing up to this deal, Osborne has made sure that despite condemning those hiding their money in Switzerland, the UK authorities will not find them, nor their money, and those who declare all to the authorities will continue to have to make up the gap.

Global effect

Even worse is the damage that this could do to efforts to stop tax dodging globally. The best way to stop tax dodging is for information to be shared, so revenue authorities can trace the taxes they are owed. For several years global efforts have been intensifying to require just such information sharing.

By striking this deal with Switzerland, the UK appears to be breaking ranks on these efforts, and will encourage those seeking to retain secrecy to try and get others to split too. Should this happen the worst affected will be the developing countries, as they lack the political and economic clout to get any kind of deal with Switzerland.

By striking a deal to get less than they are owed, the UK government has also made it much less likely that developing countries will ever be able to get the taxes owed to them from tax havens.

This is not an insignificant issue for developing countries: in 2008 it is estimated that illicit outflows from developing countries reached $1.26 trillion. Christian Aid estimates that developing countries lose $160bn a year in lost tax revenue - significantly more than they receive in aid.

UK in minority

‘If financial institutions won’t cooperate with us, we will assume that they are sheltering money in tax havens, and act accordingly.’
President Obama

So why has the UK broken ranks? It’s not that the UK can claim that there aren’t other big hitters willing to fight for global action; only Germany has signed a similar deal, while countries like the US and India are committed to taking action.

The US has passed legislation requiring information on US accounts of over $50,000 held outside the US to be passed to the IRS, while India has made clear, ‘India will not go for such a treaty. Rather, we would prefer criminal investigation and action thereof’.

The world’s biggest economy and one of the fastest growing emerging economies are committed to getting 100% of what they are owed, yet Osborne has gone it alone and settled for significantly less.

What next?

If Osborne is serious when he says that tax evaders are ‘leeches on society’ he needs to make it clear that he is committed to taking action that will stop them, both in the UK and globally.

The only way to do that remains a multilateral solution. The G20 is the best place to start, and a firm commitment to ending tax haven secrecy by the G20 would begin to repair the damage Osborne has caused.

Take action!

Call on David Cameron, Nick Clegg and Nicolas Sarkozy to end tax haven secrecy at this year’s G20.  Click here!

Cross-posted from the Christian Aid blog…

The UK has initialed an agreement with Switzerland which we recently wrote up on the Task Force blog. In short, UK tax evaders using banks in Switzerland will have to start paying some tax – but the UK will allow those (criminal) tax evaders to avoid penalties and retain their anonymity. The UK will have to trust that Switzerland will keep its part of the bargain, even though it will be impossible to conduct any comprehensive checks. There are reasonable fears that this model may spread widely to other countries.

We at TJN think this is a thoroughly rotten and corrupt deal. For the following reasons.

• It sabotages European and other efforts to fight together for financial transparency. This has implications for countries, rich and poor, around the world.
• It lets proven tax-evading criminals off the hook.
• In colluding with criminality and puts wealthy tax evaders in a specially privileged position, above ordinary mortals. One set of rules for them, another for the rest of us. (See the UK uncut post linked to, below.)
• In creating lawlessness for the elites, while creating repression for the poor and weak, it not only distorts society, but also distorts and corrupts markets.
• At a time of national soul-searching, following the UK riots, and worries about a “moral collapse” in every corner of British society, to grant impunity and protection and secrecy to the wealthiest members of society sends an appalling message.
• From the information that’s available, it seems that although the deal will allow the UK to receive some (and we stress some) of the tax due to it, there is a gigantic loophole as regards inheritance taxes. From what we know so far, though not all details have been provided yet, no inheritance taxes will be levied. Why not?
• What are the ‘special rules’ for non-domiciled taxpayers? Non-doms already escape UK tax on their non-UK income. Does this mean they get a free and officially endorsed blanket of secrecy thrown over their Swiss affairs too?
• It contemptuously dismisses whistleblowers, an essential check on criminality and corruption in any society.
• It creates a ring-fenced fortress of secrecy for criminals to flourish in. Although there are supposedly safeguards to allow information-sharing in the case of certain classes of crimes, these safeguards are extremely weak, and are themselves subject to all sorts of caps and restrictions. If Switzerland is serious about tackling crime, why place severe caps on this?
• Many other vital details are still secret. How will the Swiss calculate marginal tax rates without having full disclosure of a taxpayer’s total tax affairs ? Is the UK therefore handing tax sovereignty to Switzerland?
• The UK should have followed the American example. They discovered that Swiss banks had been helping American commit tax crimes, and they went after them. During their probes, they put pressure on individuals caught out, obtained more information, and started bringing in more Swiss banks into the noose. They are in a far, far stronger position now to extract concessions out of the Swiss than the UK ever was. And the UK has been handed information on a plate about this. As Reuters notes: “British authorities are investigating hundreds of HSBC (HSBA.L) customers suspected of tax evasion after it obtained details of around 7,000 Swiss accounts at the bank from another tax authority, Why has the UK chosen to suddenly let all these people off the hook? The deal explicitly prevents the UK from acting on this data now.
• The Swiss government and Swiss banks have a long and shameful record in the past of outright lying to foreign tax authorities about their affairs, and breaking assurances. If you think lying is too strong a word, then read Tom Bower’s book Blood Money, about the efforts to hunt for justice for the victims of the Nazis. Your mind will be changed. The Swiss have a record that shows they cannot be trusted. And yet the UK has decided to take an awful lot on trust.
• In summary, this is a shabby, unprincipled and dangerous deal. It is a victory for Switzerland over the UK. If other countries (as well as Germany) are considering this, or if the UK is considering extending this corruption to other tax havens, then we need to fight it with everything we’ve got.

Patrick Odier, Chair of the Swiss Banking Association, is delighted: “overall, my assessment of the tax agreements is positive,” he told Swissinfo.ch. “They mark important milestones for the Swiss financial centre. As a banker, I am especially grateful that clients have been offered a fair solution for regularising their efforts.” You bet he’s grateful, and so are his clients.

Now here are a few headlines from elsewhere:

UK-Swiss tax deal ‘a disgrace’ warns Christian Aid – Christian Aid
The new tax deal between the UK and Switzerland amounts to collusion with criminality and will seriously damage poor countries’ attempts to collect the billions they lose to tax dodgers. See also Morality demands rethink of UK-Swiss tax deal, warns Christian Aid.

UK-Swiss tax deal: timid and anonymous – Financial Times
“As long as specific names and account details remain secret, determined tax evaders will have an edge over governments. So why have Germany and the UK been willing to settle for less than the standard set in this area in the European Savings Tax Directive, and for fewer concessions than the US received in 2009?”

David Prosser: Britain’s tawdry tax deal with Switzerland is a charter for tax evaders – The Independent.
How pleased should we be about the latest deal? About as pleased as we would be if someone had robbed a British bank, fled to Switzerland and then got away scot-free apart from the inconvenience of the local authorities handing back some of the proceeds.

La Tribune: London sells its fiscal soul for six billion Euros.
The headline puts it perfectly.

A series from Tax Research:

Let’s not get personal – this is a matter of right or wrong
This was a ‘Marmite’ issue – you’re either for or against it. You are either for or against letting tax criminals off; endorsing banking secrecy so that criminality may flourish; giving anonymity to who coldly plan and execute their crimes in organised fashion; encouraging an unlevel playing field for business so that the cheats get an unfair competitive advantage; H M Revenue & Customs not upholding the law; granting immunity to those banks and bankers who organised the handling of stolen property. It’s about ethics.

The friends of tax havens are delighted with the Swiss tax deal
The Sovereign Society, Swiss bankers, and many others, are delighted. Which says it all.

Labour shadow minister condemns Swiss tax deal
“The Government should ensure that all those who have broken the law face the full penalty. There is a significant risk that some who have taken part in criminal tax evasion will escape by paying less than if prosecuted – the Government should guarantee this will not happen.”

How can Dave Hartnett head HMRC when he utters nonsense like this?
The head of UK’s HMRC thinks this is a wonderful deal, and, bizarrely, is ‘fair’ for British taxpayers. Don’t talk rubbish, Dave.

Cameron and Osborne did the Swiss tax deal to support tax evasion – there’s no other explanation
The EU Savings Tax Directive, currently being beefed up, would have ensured we’d have got all the information we needed to demand all the tax due by those who have been criminally evading their tax bills. It would have applied to Jersey, Guernsey, the Isle of Man, Cayman and all other British tax havens that comprise the branch offices of the City of London tax haven. And it would also have extended information exchange to companies and trusts – which would have shattered the tax evasion industries in these British tax havens.I think the UK- Swiss tax deal has been deliberately engineered to scupper that.

Osborne’s just invited everyone to bank in Switzerland
the UK government has just handed a perpetual competitive advantage to Swiss banks over UK banks in the markets for savings in the UK. Think just how stupid that is.

How is it tax evasion’s no longer a crime but demonstrating about tax avoidance is?
The UK government is turning this deliberate blind eye to massive, large scale, organised looting of the UK’s tax system it is also bringing criminal charges against more than thirty young people who recently took part in a in a wholly peaceful UK Uncut demonstration against tax avoidance.
Astonishing.

The Swiss declare it’s a great day for tax evasion
The Swiss bankers love it.

In the words of TJN’s James Henry, author of the book, Blood Bankers, this is a bargain with the devil.

Imagine the horror of what would happen if this thinking spread. Tax haven secrecy would be entrenched. Criminality, impunity, corruption and a breakdown in trust would become entrenched.

This is an issue for all citizens of the world. Not only have other countries considered following the UK-German lead – but the UK appears to be considering extending this Swiss model to other countries. Take a look at this. Imagine it -  Swiss-style protection-for-secrecy deals spreading like a cancer around the world.

It is not too late to stop this in the UK. Let’s start to mobilise to get this stopped.

LONDON – The new tax deal between the UK and Switzerland amounts to collusion with criminality and will seriously damage poor countries’ attempts to collect the billions they lose to tax dodgers, Christian Aid is warning.

‘This deal makes it much less likely that developing countries will ever be able to get the taxes owed to them from those hiding money in tax havens like Switzerland. It is a disgrace,’ said Christian Aid Director Loretta Minghella.

The UK-Swiss agreement will lead to Britons with secret Swiss bank accounts starting to pay tax on them, which the Swiss will pass on to the UK – but crucially, without revealing account holders’ identities.

Tax evaders will have the option of owning up to the UK authorities about their accounts, as an alternative to paying a one-off back tax of between 19 and 34 per cent on their hidden money.

However, Ms Minghella argued that by allowing people to keep their identities hidden, the UK Government is, in effect, colluding with criminality.

‘Why would anyone rather pay a back tax of 19 to 34 per cent on the money they have hidden in Switzerland than reveal their identity, unless they have done something seriously wrong? And why is the Government letting them get away so lightly?’ she asked.

‘The most likely reason is that they have evaded a whole lot more tax than that or been involved in other serious criminal behaviour.

‘This is a bad deal for honest British tax payers and for scores of poor countries around the world.’

Christian Aid believes the deal will seriously damage global efforts to curb tax dodging – a menace which it estimates costs poor countries $160 billion a year, far more than they receive in aid.

Germany is also reported to have initialled a similar deal with Switzerland.

Poor countries lack the political and economic clout to do such deals with Switzerland – but they too lose billions as a result of money being illegally hidden in tax havens.

And just like the UK, they need that money to fund vital public services such as schools, hospitals and care for the elderly.

Christian Aid is calling on the UK and other G20 Governments to use their November summit meeting in Cannes to bring about an end to the tax haven secrecy exemplified by Switzerland.

Specifically, the G20 should broker a new system of automatic information exchange between Governments – including those of poor countries – to help them to detect when citizens hide wealth offshore.

###

Contact:

Rachel Baird
+44 0207 523 2446
+44 07545 501 749
rbaird@christian-aid.org

Notes to Editors:

1. Christian Aid works in some of the world’s poorest communities in nearly 50 countries. We act where the need is greatest, regardless of religion, helping people build the lives they deserve.

2. Christian Aid has a vision, an end to global poverty, and we believe that vision can become a reality. Our report, Poverty Over, explains what we believe needs to be done – and can be done – to end poverty.  Details athttp://www.christianaid.org.uk/Images/poverty-over-report.pdf

3.  Christian Aid is a member of the ACT Alliance, a global coalition of 100 churches and church-related organisations that work together inhumanitarian assistance and development.  Further details at http://www.actalliance.org

4. Follow Christian Aid’s newswire on Twitter: http://twitter.com/caid_newswire

5. For more information about the work of Christian Aid visit www.christianaid.org.uk

retrospectively tax existing banking relationships in Switzerland, persons resident in the UK should be given one chance to make an anonymous lump-sum tax payment. The size of this tax burden will vary from between 19% to 34% of the assets in question, and will be determined based on the duration of the client relationship as well as the initial and final amount of the capital. Instead of such a payment, those affected should also have the possibility of disclosing their banking relationship in Switzerland to the British authorities.

To say that this is a quite extraordinary act by the UK government massively understates the irresponsibilioty of what they have agreed.

The UK is apparently going to accept settlement for past tax at around 30% of the assets held in a Swiss account. That might be reasonable if the funds placed in Switzerland had been taxed in the UK before being deposited in Switzerland and it was only the income on  those funds that had been evaded since then. But what we know for sure is that most money held in Switzerland got their illicitly – it was not taxed before its arrival in the Alps. It’s tax evaded money.

As a result we would now expect 40% tax (at least) on the capital in all these accounts in Switzerland as a matter of course plus a 100% penalty that might reasonably be charged in a case of deliberate tax evasion (meaning in total 80% of the capital balance should be paid to settle the tax originally evaded)   and then there is of course interest due on the late payment plus tax due on the income earned since. Nothing less than 100% is due on these balances – wiping them out of course – and anything else is a scandalous underpayment.

But George Osborne is not going to demand that sum. He’s instead going to accept a tiny part of what is owing.

So at a time when the government is demanding respect for the law, high moral standards and responsibility by all in society one group of criminals – those who have deliberately and knowingly broken the law by tax evading in Switzerland – are going to be let off without paying anything like what they owe even in tax, let alone in penalties and interest. What is more,  instead of these people being brought before an all night court sitting to make sure justice is done with names and addresses being published for all to see anonymity is instead being guaranteed to those criminals so they can still held their heads up high in polite society.

It’s a sickening dual standard at the time when the government should be taking the moral lead in showing we’re all in this together. And it shows just exactly what the government thinks – which is that there really is a dual standard in the UK’s law.  There is one law for the rich and one for everyone else, and this government is pleased to reinforce the fact.

Cross-posted from the Tax Research UK blog…

LONDON – Ministers should urgently rethink plans for a deal with Switzerland which would see UK tax evaders let off lightly while harming poor countries, says Christian Aid.

‘We fear that the agreement will be soft on the Britons who have illegally hidden billions in the Alpine tax haven but hard on developing countries, which also suffer from Swiss banking secrecy,’ said Christian Aid DirectorLoretta Minghella.

‘In a week when there has been a lot of talk in the UK – following the riots – of a moral deficit in society, it is extraordin­ary that the UK Government appears poised to let tax evaders off with nothing more than a regular tax bill.

‘People who have hidden money in secret Swiss bank accounts in order to evade their legal responsibi­lities to the UK will be able to escape unpunished and they won’t even have to reveal their identities to the UK taxman.’

The proposed agreement will lead to Britons with secret Swiss bank accounts starting to pay tax on them, which the Swiss will pass on to the UK – but crucially, without revealing those people’s identities.

Christian Aid believes the deal will seriously damage global efforts to curb tax dodging – a menace which it estimates costs poor countries $160 billion a year, far more than they receive in aid.

Germany is also reported to have initialed a similar deal with Switzerland.

Poor countries lack the political and economic clout to do such deals with Switzerland - but they too lose billions as a result of money being illegally hidden in tax havens.

And just like the UK, they need that money to fund vital public services such as schools, hospitals and justice systems.

Ms Minghella added: ‘I urge UK ministers to reconsider the Swiss tax deal as a matter of urgency.’

Christian Aid is calling on the UK and other G20 Governments to use their November summit meeting in Cannes to bring about an end to the tax haven secrecy exemplified by Switzerland.

Specifically, the G20 should broker a new system of automatic information exchange between Governments – including those of poor countries – to help them to detect when citizens hide wealth offshore.

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Contact:

Rachel Baird
+44 0207 523 2446
+44 07545 501 749
rbaird@christian-aid.org

Notes to Editors:

1. Christian Aid works in some of the world’s poorest communities in nearly 50 countries. We act where the need is greatest, regardless of religion, helping people build the lives they deserve.
2. Christian Aid has a vision, an end to global poverty, and we believe that vision can become a reality. Our report, Poverty Over, explains what we believe needs to be done – and can be done – to end poverty.  Details athttp://www.christianaid.org.uk/Images/poverty-over-report.pdf
3. Christian Aid is a member of the ACT Alliance, a global coalition of 100 churches and church-related organisations that work together inhumanitarian assistance and development.  Further details athttp://www.actalliance.org
4. Follow Christian Aid’s newswire on Twitter: http://twitter.com/caid_newswire
5. For more information about the work of Christian Aid visit www.christianaid.org.uk

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The Task Force on Financial Integrity and Economic Development addresses inequalities in the global financial system that penalize billions of people, and advocates for improved transparency and accountability.

Christian Aid is a  coordinating committee member of the Task Force on Financial Integrity & Economic Development .

For additional information please visit  http://www.financialtaskforce.org

WASHINGTON, DC – Amidst speculation over details of a possible tax agreement between Switzerland and Britain, Global Financial Integrity (GFI) reiterated the message that a broader, global solution to illicit financial practices and banking secrecy is needed.

“The recent agreement to remit information on secret Swiss accounts with Germany was a spot-check fix,” said GFI director, Raymond Baker. “The Swiss are handing over money and some account information without making substantive changes to a system that puts tax collection and law enforcement officials at a disadvantage.”

Under current standards, based on the Organization for Economic Cooperation and Development’s (OECD) Model Tax Convention (Article 26), countries are obliged to exchange information that is “foreseeably relevant to the correct application of a tax convention as well as for purposes of the administration and enforcement of domestic tax laws of the contracting states.”

“Under the current standard tax collection authorities are required to provide information and justification for information that is often prohibitively difficult to obtain,” said Baker. “Automatic exchange of tax information would eliminate the cat and mouse games and ensure that tax evaders cannot easily stash their money in offshore, secret bank accounts.”

It is estimated that individuals have about US$12 trillion of assets in jurisdictions other than their own countries of residence that are not declared in their own countries of residence; the lost tax revenue annually from such undeclared assets is estimated at US$255 billion. Tax evasion by corporations and other entities is also a major problem.

GFI is calling on the G20 to implement broader, global reforms at the next G20 summit, to be held in Cannes, France in November. In addition to conducting high-level outreach to the G20, GFI has launched—in coalition with NGOs from around the world—the End Tax Haven Secrecy (ETHS) campaign, a global grassroots effort calling on G20 leaders to end tax haven secrecy at the Cannes Summit.  The campaign, which just launched a new web video this month, has already generated roughly 10,000 letters to G20 leaders from individuals world-wide.  To learn more about the campaign, visit www.EndTaxHavenSecrecy.org.

Visit the Task Force on Financial Integrity & Economic Development’s portal on Automatic Tax Information Exchange for more information on the automatic exchange of tax information.

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Contact:

Monique Perry Danziger
mdanziger@gfip.org
+1 202-293-0740

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Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

For additional information please visit www.gfip.org.

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