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Treasury strikes tax evasion deal with Switzerland to recoup unpaid cash

Switzerland wants to end the exploitation of its banking system

The Treasury has struck a deal with the Swiss government to repatriate unpaid British taxes from private bank accounts and end the exploitation of the country’s secretive banking system.

Switzerland has agreed to make a one-off deduction from all existing accounts held by people who are liable for British taxes but have not paid them. It is giving Britain Sfr 500m (£385m) as a gesture of goodwill. The one-off tax grab could raise as much as £5bn for the Treasury and will be applied in 2013.

From that year onwards the Swiss government and banks have jointly agreed to apply a new “withholding” tax on bank accounts on behalf of the British government of 48% on investments and 27% on gains where the records show the person is liable to British taxes. The deal will mean that the Swiss government and banks will identify accounts held by British taxpayers and disclose their details, ending the secrecy that has traditionally allowed people to keep unidentified funds in Switzerland.

The rates have been set slightly lower than the normal British ones to account for the fact that deductions will take effect sooner than would happen under the British tax system.

Treasury insiders acknowledged that the negotiations with the Swiss system had been “painstaking” and, at times, “delicate”, but it follows shortly after a similar deal was struck between the Swiss and the Germans. “It’s no longer acceptable to avoid tax on this scale. If Germany and the UK are applying pressure the Swiss have taken the lead to settle it,” the Treasury source said.

George Osborne, the chancellor, said: “Tax evasion is wrong at the best of times, but in economic circumstances such as the present ones it means that hard-pressed taxpayers are forced to pay even more. That is why this coalition government made it a priority to go after those who don’t pay their fair share. We will be as tough on the richest who evade tax as on those who cheat on benefits. The days when it was easy to stash the profits of tax evasion in Switzerland are over.”

The application of the one-off tax in 2013 to recoup unpaid money could trigger a stampede away from Switzerland’s banks from people who want to avoid having to pay it.

The Treasury said that British taxpayers with Swiss accounts could expect to hear from their banks in due course.

The accountancy firm Deloitte highlighted the fact that the deal meant that people who are non-domiciled for tax purposes could also be liable to pay. “One surprising feature of the agreement is in relation to non-domiciled individuals who will be subject to withholding tax post-January 2013 if they do not agree to information exchange between the UK and Swiss authorities,” Tom Rowbotham, a partner in tax dispute resolution, said. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds