Deal with Swiss over Tax on UK Citizensí Bank Accounts

25 August 2011 - Which Way to Pay


Deal with Swiss over Tax on UK Citizensí Bank Accounts

The end of tax-free offshore bank accounts seems to be in sight as the Swiss government have agreed to a deal with the UK over Swiss bank accounts held by UK citizens. The deal, which is expected to increase tax revenue by £3 billion to £6 billion per year, will tax the accounts whilst maintaining the anonymity of the account holders. The arrangement is the latest victory in the HMRC campaign to tackle tax evaders hiding money in offshore bank accounts and is the second such deal to be made this month following a similar agreement between the German and Swiss authorities.

The Swiss banking system has allowed foreigners to avoid paying tax to their own countries without paying tax to Switzerland either. The Swiss banking laws provide total anonymity and secrecy for those with bank accounts there. The new deal will mean that starting in 2013, the Swiss authorities will tax UK citizensí bank accounts and will pass the money on directly to the UK Treasury, all the while keeping the identity of the account holders secret.

The deal has been criticised by some as the account holders will still be paying significantly less tax than they would do on UK bank accounts and that this was therefore a short-term solution to bring in extra money. The account holders will be taxed between 19% and 34%. They will also face a yearly levy of 27% to 48% on the income from these accounts, the level dependent on whether the income comes from interest, dividends or capital gains. The Swiss have also agreed to make a down payment of 500 million Swiss Francs. The deal follows a similar deal made between the UK and the Lichtenstein government in 2009, which was also a notorious haven for tax evaders.


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