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Update on the UK’s Squalid Secrecy Deal with Switzerland

August 26, 2011

By Nicholas Shaxson

Nicholas Shaxson is the author of Treasure Islands, a book about tax havens, and writes for the Tax Justice Network.

Adapted from the Tax Justice 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.

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Disclaimer: Unless specifically stated to be the views of the Financial Transparency Coalition, the opinions expressed on this blog are solely the opinions of the individual blogger and are not necessarily those of the Financial Transparency Coalition.

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