CIOT: Swiss agreement leaves plenty of routes to prosecute tax cheats
The UK Swiss Tax Agreement published today leaves the authorities with a number of routes to prosecute lawbreakers with assets in Swiss bank accounts, if they choose to use them, says the Chartered Institute of Taxation (CIOT).
Gary Ashford, who represents the CIOT on the Compliance Reform Forum, and is National Head of Tax Investigations and Dispute Resolution at RSM Tenon, commented:
“This is a significant agreement which opens a new chapter in tackling international tax evasion. Rightly, the net is tightening on those who think they can keep money in offshore bank accounts out of sight of the taxman.
“Since the deal was announced HMRC have faced much criticism that it represents an ‘amnesty for tax fraudsters’. The text of the deal, published today, leaves them with plenty of routes to pursue Swiss account holders guilty of serious crimes if they choose to do so. This applies even to those who pay the one-off tax on their Swiss account balances or who disclose their account information voluntarily.
“If the assets represent the proceeds of non-tax crime HMRC can still prosecute. If the assets are the proceeds of criminal tax-related offences punishable by two years or more imprisonment, HMRC can still prosecute. And even if the assets fit into neither of these categories, HMRC are offering no guarantees, just saying they are ‘highly unlikely’ to prosecute. This is substantially different to the Liechtenstein Disclosure Facility, where HMRC have said there will be no prosecution in these circumstances.1
“Additionally, and significantly, there is a note that even these assurances only apply to HMRC and ‘no assurances are given in respect of any activity by other United Kingdom law enforcement agencies’. Increasingly we are seeing the police, including the Serious Organised Crime Agency, investigating tax offences.
“Add to this the information powers requiring the Swiss authorities and banks to provide information on 500 people a year who HMRC want them to investigate2, and it is clear that the means are there for HMRC to step up their efforts against those with criminal and undeclared assets in Swiss accounts.”
Notes to Editors
1. The Liechtenstein Disclosure Facility requires UK taxpayers with undeclared investments in Liechtenstein to disclose them and settle their tax liability to the UK government under a special arrangement. Liechtenstein banks must contact their customers by October 2011, telling them that they must either declare themselves to be UK tax compliant or they must join the LDF. If they do not do this, the banks must close the relevant customers’ accounts.
The Joint Declaration signed by HMRC and the Liechtenstein Government in August 2009 states:
“a relevant person who makes a full, accurate and unprompted disclosure to HMRC under the disclosure facility, will not be subject to criminal investigation by HMRC for a tax-related offence, unless the source of the funds from which the relevant person has benefited or may benefit constitutes “criminal property” within the meaning specified in section 340 of the Proceeds of Crime Act 2002 (provided that the definition of criminal property for this purpose will not include property that has arisen solely as a result of illegal tax evasion).”
For more information see the HMRC website: http://www.hmrc.gov.uk/disclosure/liechtenstein-disclosure.htm
2. In an interview for the CIOT website about the UK-Switzerland tax deal, Dave Hartnett, Permanent Secretary for Tax, explains how the UK and Swiss governments have agreed a ‘ratchet’ deal where the more successful HMRC is in identifying people who owe tax on their Swiss accounts, the more people the taxman will be able to search for in future.
Dave Hartnett said:
I think it's important to realise that the United Kingdom and Switzerland made a change in the double taxation agreement at the beginning of this year, and that is, the article 26 of the standard double taxation agreement, which provides for exchange of information on request, applies for Switzerland, so that, if you were investing in Switzerland, and we had reason to be worried about that, we could ask the Swiss what they know about you, but in a specific context. What this extended provision will do is that, in future, if we needed to ask about you, the Swiss will search their banking system – the whole banking system – and provide us with everything they actually know about you, so we would get a lot more information. There's a novelty with this provision as well, and that is that the more successful HMRC is in identifying people who have additional tax liability to pay, the greater the number of people we will be able to search for. The 500 raises like a ratchet. And if we are hopeless at identifying people who have hidden the money the 500 will come down.
The CIOT podcast on the Swiss tax deal can be heard in full at: http://www.tax.org.uk/media_centre/Podcasts/Synopsis/UK-Switzerland+tax+deal+with+HMRC
3. The Chartered Institute of Taxation (CIOT) is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities.
The CIOT’s comments and recommendations on tax issues are made solely in order to achieve its primary purpose: it is politically neutral in its work. The CIOT will seek to draw on its members’ experience in private practice, government, commerce and industry and academia to argue and explain how public policy objectives (to the extent that these are clearly stated or can be discerned) can most effectively be achieved.
The CIOT’s 15,600 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’.
ENDS –
George Crozier
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