Chancellor George Osborne’s deal with the Swiss government on banking secrecy has been attacked from all sides, yet it marks a significant step forward in the tightening of the tax noose around those looking to hide their wealth offshore.
Any deal that can bring in £3bn-£6bn in such fiscally challenging times should not be sniffed at but criticism of the move has been wide ranging.
Christian Aid has attacked the deal as damaging global efforts to curb tax dodging. The charity estimates tax dodging costs poor countries $160bn a year and has urged the G20 nations to use their November summit to bring an end to Switzerland’s tax haven secrecy, rather than sorting deals for themselves.
Anti-secrecy campaigners have also accused the deal of torpedoing the EU Savings Tax Directive that aimed to force Switzerland to change its bank-ing secrecy rules for everybody.
Even the Adam Smith Institute has argued that low tax jurisdictions promote comp-etition in tax rates across the world, although what that has to do with secrecy is less clear.
Some campaigners have even suggested the UK deliberately set out to undermine EU efforts, with the specific aim of protect-ing UK offshore jurisdictions. But this seems hard to explain in light of the fact that Germany, which has no such motive, has already cut such a deal.
I agree a more wide-ranging deal would have been better. Poor countries do not have the same bargaining power as Germany and the UK. If the UK’s agreement has broken a con-sensus for wider change then that is a missed opportunity. But we do not know how close such a consensus was to achieving anything and we will not do so unless politicians involved in the process come out and say so.
It is worth remembering that while the general principle of Swiss banking secrecy will remain, Switzerland has con-ceded a limited lifting of secrecy to the UK tax authorities. Barely mentioned has been the crucial concession that the UK has the right to request the details of up to 500 people it believes are stashing their cash in Switz-erland each year. That sounds like the de facto end of banking secrecy in Switzerland as it has been known for centuries.
This facility may lead to HM Revenue & Customs making an example of some high-profile figures to encourage others to toe the line. The threat of prosecution for tax evasion will surely reduce abuses. Some will go offshore to less reputable jurisdictions but others will decide it is simply no longer worth the effort.
The deal has also been criticised for the long run-in time before it bites. It takes effect from 2013, meaning evaders have got ample time to stash their money elsewhere.
This is true but you have to look at the deal as part of a whole. The world banking system cannot be changed overnight. Big economies across the world are applying pressure on offshore jurisdictions to be more transparent and we can expect this trend to continue.
The feedback I get from IFAs is that in reality they rarely get asked to advise on banking secrecy. As with accountants, money laundering and other compliance requirements mean it is not something IFAs can help their clients with.
Does that mean those using Swiss accounts illegally are doing so direct or with the assis-tance of unregulated offshore advisers? Possibly so. It may not be perfect but this deal will push those individuals to riskier jurisdictions and with time this will become less attractive.
John Greenwood is editor of Corporate AdviserMoney Marketing