Osborne gifts £40bn to super-rich in Swiss deal


9:45 am - October 28th 2010

by Newswire    


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Wealthy Britons could dodge £40bn in tax payments after the UK agreed ahead of negotiations on a tax deal with Switzerland that the country could maintain its traditional banking secrecy.

Thousands of higher rate taxpayers, who pay 50% tax on their income in the UK, will be allowed to keep their secret accounts in Zurich and Geneva and pay a low tax rate after the Treasury failed to secure agreement on sharing bank details.

Proposals to make the deal retrospective were also rejected by the Swiss authorities, saving further large sums for wealthy UK residents.

Richard Murphy, head of Tax Research, said: “No indication is given as to how these accounts are to be regularised. Indeed, there is no prospect they can be because the £40bn or so of evaded assets will not have to be declared by name by the Swiss. In that case there is no prospect of UK interest or penalties being charged.

…more at The Guardian

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Total nonsense from Richard Murphy (as usual) and the Guardian.

It’s only taxable if that money is earnt in the UK. Only (some) of the interest on that money is taxable in the UK.

The Guardian’s 40bn number assumes all the125bn in Swiss accounts is taxable in the UK, which is highly unlikely.

Let us assume though, that all the interest on that cash is taxable, and you get to about 1-2bn depending whats rates of interest and taxation you use.

So basically, Osbourne has managed to recover near enough exactly what we are owed.

Quite, Murph is assuming that the entire capital amount is taxable in the UK.

Which is complete and utter nonsense. As one of the commenters on my blog pointed out, he himself works outside the UK (Russia, Nigeria, oil bidness), banks the money in Switzerland (having paid all applicable Russian/ Nigerian taxes, naturally, and who would want to actually bank their savings in either country?) and his savings are thus counted as being part of that cash held in Switzerland by British nationals.

And not a single penny of UK tax is due on any part of that money, not on the capital and not, unless he returns to being resident in the UK, on any of the interest.

I’ve said this before and no doubt I’ll have opportunity to say it again. Relying upon Murphy for either facts or logic isn’t doing you lefties any favours.

4. Robert Morgan

Tyler, it’s pretty clear that the £40bn is in “evaded assets”. We all know the reality: loss of income tax on credit interest is the tiniest part of the loss to HMCE from offshoring.

It’s pretty clear from the Guardian article that it’s the income (plus penalties and interest), not the tax on the interest on the income, that’s to play for.

If your complaint is that there’s no source in the Guardian article for the £40bn figure, then I agree, but don’t suggest the problem is only worth £1bn.

4 – If the principle sum is entirely based of money earned in the UK, and thus liable to UK income tax then the £40bn figure stands. But since it clearly, demonstrably isn’t, it doesn’t. The £1bn figure would be the tax due on interest paid to British residents.

I thought the right wing believed that if you have nothing to hide you have nothing to fear.

Oh sill sally, that is for the plebs. The rich must be allowed to go on money laundering and tax avoiding. I mean , how else can they send their sprogs to Eton.

But remember folks just in case you had forgotten. “We are all in this together”

No, seriously!

7. Robert Morgan

5 – Tim, so we’re agreed it’s somewhere between £1bn and £40bn? Yes.

But it would seem likely to be at the high end, wouldn’t it? Let’s be honest, people don’t use Swiss bank accounts just to reduce tax on interest. They park their incomes there, either as straightforward tax evasion, or through loopholes which could be closed with Swiss consent.

Shall we settle on £20bn?

@6 “I thought the right wing believed that if you have nothing to hide you have nothing to fear.”

I was honestly under the impression that the above was more of a lefty belief, the right seeing far less need for state interference.

@7 “But it would seem likely to be at the high end, wouldn’t it?”

Evidence….anyone….Bueller….?

But it would seem likely to be at the high end, wouldn’t it? Let’s be honest, people don’t use Swiss bank accounts just to reduce tax on interest

I’d have thought that a large portion of it would be from British expats earning (and being taxed) overseas, and depositing in Swiss banks as a preference to, as Tim W says, Nigerian or Russian ones. You really can’t just make up a figure and call it tax evasion.

10. Robert Morgan

> You really can’t just make up a figure and call it tax evasion.

No, the government can’t, of course. Which is why they’re trying/failing to get the Swiss to tell them.

But we’re discussing the likely size of the problem. It’s just irrational in that context to say, “we have no evidence so we’ll assume the minimum (and no tax evasion)”. I’m not sending them a bill here!

It’s harder to defend my assertion it’s likely to be at the high end. That’s based somewhat on anecdote and, more importantly, what you’d expect to happen when you create an unaccountable tax haven. It’s also consistent with the various (mostly unactionable) leaks and whistle blowers we’ve had over recent years – coming both out of foreign banks and various other tax havens.

If you don’t like the above, presumably all you’re prepared to say is that the sum is from £1bn-£40bn. Not that it’s £1bn?

“If you don’t like the above, presumably all you’re prepared to say is that the sum is from £1bn-£40bn”

Well, what we are prepared to accept (or at least I am) is that the sum owed on an annual basis is likely to be around £1 billion. Which is what UK Treas. is going to be collecting.

So I’d say “well done chaps, well done”.

12. Chaise Guevara

@ 8

“I was honestly under the impression that the above was more of a lefty belief, the right seeing far less need for state interference.”

It’s an authoritarian belief. In the UK at least, authoritarianism is generally associated with the right (although Labour and the Tories have recently switched places there). You won’t see many lefties calling for the death penalty, for example.

Basically, it’s a mistake to conflate economic ‘interference’ with state social control.

“It’s an authoritarian belief. In the UK at least, authoritarianism is generally associated with the right (although Labour and the Tories have recently switched places there). You won’t see many lefties calling for the death penalty, for example.”

Authoritarianism has been far more closely associated with the left in the UK for some time now, (I’m not ignoring the historical side just focusing on how things stand now).

As to the death penalty, it would be intruiging to see how many working class Labour voters support it, I suspect that beyond the realms of the Guardian, support may run higher than you assume.

“Basically, it’s a mistake to conflate economic ‘interference’ with state social control.”

One does tend to go hand in hand with the other, in fact a great deal of what government does is “economic interference” with the goal of social control, (sorry, nudging, not control at all, very different indeed, etc, etc……)

14. Luis Enrique

Robert Morgan are you talking about an annual tax obligation (like a tax on interest earnings) or a one-off seizure of wealth (like seeing £100bn on deposit and taking 40% of it) – until you’re clear on that, all this talk of the true figure being somewhere between £1bn and £40bn is hogwash.

It is worth pointing out why the Swiss started freaking out when their secrecy was being undermined. The British and German tax authorities proved their free market credentials by paying for data that was obtained from back office staff in Luxembourg and Lichtenstein. The Swiss then knew they had to negotiate. HMRC should take anything they are offered by the Swiss authorities. However, they should also advertise financial inducements for anyone who wants to provide them with information. Moderately paid back office staff see six figure sums offered for data. Moderately paid back office staff pass data to HMRC. A veritable free market in information.

16. Chaise Guevara

@ 13

“Authoritarianism has been far more closely associated with the left in the UK for some time now, (I’m not ignoring the historical side just focusing on how things stand now).”

13 years, perhaps? It’s associated with New Labour, who aren’t all that far left (although I’ll cede that they’re still to the left of the Tories and currently far more authoritarian).

“As to the death penalty, it would be intruiging to see how many working class Labour voters support it, I suspect that beyond the realms of the Guardian, support may run higher than you assume.”

Possibly. But it’s still conventional to call people who are strong on law and order “right wing”. When Straw was criticising Tory penal policy for being too lax, that was described as “attacking from the right”.

“One does tend to go hand in hand with the other, in fact a great deal of what government does is “economic interference” with the goal of social control, (sorry, nudging, not control at all, very different indeed, etc, etc……)”

They are very different. What about the social control of traditional right-wing policies, such as repressing homosexuals, and current right-wing policies, like repressing Muslims? Of course, the fact that someone is a libertarian in no way indicates that they are homophobic or Islamophobic (libertarians and social conservatives being strange bedfellows), just as the fact that someone wants to narrow the gap between rich and poor does not mean they want to rule with an iron fist.

What you’re doing is taking the economic definition of left and right and applying it to non-economic policy, which is nonsensical. It’s the same false logic people use to call the Nazis left-wing.

“Possibly. But it’s still conventional to call people who are strong on law and order “right wing”.”

What about the likes of Peter Hitchens who are pro-Death penalty but also very pro-civil liberties? I think a distinction needs to be drawn between being tough on criminals who are found guilty and the rights of those who have not yet been found guilty.

18. Robert Morgan

14 – Luis

“until you’re clear on that, all this talk of the true figure being somewhere between £1bn and £40bn is hogwash.”

How tedious. OK, what’s the precise question we’re trying to answer? How about: What, in an ideal world, is the maximum amount HMCE might be able to reclaim in tax that ‘ought’ to have been paid into the UK but sits in Swiss accounts?

So I suppose we’d assume complete information from the Swiss, take a period such as 5-7 years, work out the rules and begin to claw back payments, penalties and interest. We don’t know the exact amount such an approach would generate, but we all seem agreed it’s more than £1bn.

I have been pondering the Vodafone and Osborne Tax cheats. Is there a way we as citizens can file a class action lawsuit of fraud against both, and indeed others that will emerge? Osborne is approving policy that will directly effect his ability to cheat on his taxes and the conflict of interests is abundantly clear.

Do we have any legal experts who can advise?

I have been pondering the Vodafone and Osborne Tax cheats. Is there a way we as citizens can file a class action lawsuit of fraud against both, and indeed others that will emerge? Osborne is approving policy that will directly effect his ability to cheat on his taxes and the conflict of interests is abundantly clear.

Do we have any legal experts who can advise?

First point, you can’t file a class action lawsuit for fraud (hell, you can barely file a class action lawsuit at all in the UK). Second point, Vodafone aren’t tax cheats, and it’s defamatory to state that they are. I suggest you read the High Court judgement finding in Vodafone’s favour. Third point, unless Osborne is intending to set up a controlled foreign company in an Eu member state, the Vodafone decision is unlikely to affect him at all.

Other than that, good point.

21. Robert Morgan

“Vodafone aren’t tax cheats, and it’s defamatory to state that they are.”

I couldn’t imagine a pithier illustration of the craziness and folly of allowing corporations to sue for libel.

22 – I’m sure they wouldn’t bother to sue over something so trivial, but the idea that Vodafone have scammed or cheated HMRC, when they have both an internal HMRC Commission decision and a High Court judgement stating that they do not owe any tax on this matter at all is absurd.

23. Robert Morgan

22 – Vodafone were excused because, at appeal, they persuaded the High Court that their Lichtenstein subsidiary was, under current EU Law, carrying out “genuine economic activities” and therefore there was no UK tax to pay.

Lichtenstein!
Is that right?

Whilst I’m sure the judges applied the legislation correctly, the case is a large corporation after a lengthy legal battle, barely escaping a multibillion tax bill because (it seems) of a EU harmonisation loophole. The moral element is pretty clear, wouldn’t you say?

if I were you, I’d be distancing myself from the whole unpleasant business. Not, as you appear to be, fighting their corner.

Whilst I’m sure the judges applied the legislation correctly, the case is a large corporation after a lengthy legal battle, barely escaping a multibillion tax bill because (it seems) of a EU harmonisation loophole.

It’s not a loophole. The High Court ruling (all but inevitable after the Cadbury-Schweppes case) was that the entire basis of CFC tax legislation in this country is in direct conflict with a central EU principle – freedom of establishment – and should therefore be disapplied. If you want to argue that where European and British laws are in conflict, British laws should take precedence, I won’t disagree but just note that in practice they don’t.

25. Robert Morgan

“It’s not a loophole”

OK, point taken. But would you agree that, other than – can I call it – a technicality, that money would be judged taxable as Vodafone UK’s?

The moral case, the intent and spirit of tax law (albeit not of freedom of establishment), all of that is against Vodafone. If there’s a moral case to be made, it’s against them. And they’d have lost, what, 10 years ago?

But would you agree that, other than – can I call it – a technicality, that money would be judged taxable as Vodafone UK’s?

If the CFC tax was legal then yes, that money would have been taxable. If the tax wasn’t legal, then the money wasn’t taxable. It’s not really a moral question though – HMRC believed that Vodafone owed money under ICTA, Vodafone believed that that provision of ICTA couldn’t apply to that particular transaction and that therefore they didn’t owe HMRC any money. They’ve eventually agreed to settle – it’s a fairly standard tax dispute really.

@13 Falco: “As to the death penalty, it would be intruiging to see how many working class Labour voters support it, I suspect that beyond the realms of the Guardian, support may run higher than you assume.”

This is way off topic, so I will be brief.

When pollsters ask people what they think about questions such as capital punishment, responses are a gut reaction. Simple poll questions about National ID cards drew a similar gut response; when the question was modified to describe how National ID might work (eg that people seeking a new identity to escape a violent former partner would be tracked in a central database), approval fell.

It is all about the question. When interviewing a job candidate, we never ask questions that can be answered yes/no. So why should we take yes/no opinion polls seriously?


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