Thursday, 25 August 2011

Switzerland, UK sign tax deal

Updated at: 1501 PST, Thursday, August 25, 2011
Switzerland, UK sign tax deal

ZURICH/LONDON: Switzerland and Britain struck a deal to tax money kept by British residents in secret Swiss bank accounts, which will gift a windfall to the cash-strapped British government and helps the Alpine country's banks come clean on untaxed accounts.

The Swiss bankers' association welcomed the agreement but some tax experts wondered if it was the best deal possible for Britain.

Under the deal, money held by British residents with Swiss banks will be subject to a levy between 19 and 34 percent of the account balance and a withholding tax will apply going forward, the Swiss finance ministry said in a statement.

Swiss banks will have to pay 500 million Swiss francs ($630 million) upfront and the retro-active levy could net around 5 billion pounds ($8.2 billion) for the British government, keen to boost revenue as it struggles with one of the largest budget deficits among industrialised countries.

From 2013 onward, a withholding tax between 27 percent and 48 percent will be applied, depending on the category of capital income. Both rates are slightly lower than the respective top tax rates in Britain.

The deal, which has to be approved by parliaments, follows the blueprint of a deal Switzerland sealed with Germany two weeks ago.

Strict secrecy has helped Switzerland build up a $2 trillion offshore financial sector. But the country has faced an international campaign in recent years against tax evasion as governments with big budget deficits seek to boost revenues.

British Finance Minister George Osborne has vowed to crack down on tax evasion as he has set out to eliminate a budget deficit of more than 10 percent over the next 4 years with a tough austerity program that includes unprecedented cuts in public spending.

"We will be as tough on the richest who evade tax as on those who cheat on benefits," Osborne said in a statement. "The days when it was easy to stash the profits of tax evasion in Switzerland are over."

Some tax experts voiced doubts about the value of the deal for Britain. Ronnie Ludwig, a partner in the private client team at accountants Saffery Champness, said the UK could have gone further in clawing back tax from undeclared assets.

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