By Anita Hawser
As governments in the US and Europe embark on a program of austerity measures, they are more eager than ever before to claw back millions from undeclared offshore accounts.
Swiss banks reach deal with UK, Germany
Recent moves by both the US and UK governments suggest that tax authorities’ grip on undeclared accounts is tightening, calling into the question the future for offshore tax havens.
In the US, the Internal Revenue Service is reportedly cracking down hard on individuals that have not declared income. “The IRS is currently investigating banks in Switzerland, the Caribbean and other areas around the world with a view to getting reports on the financial transactions of US taxpayers,” said Howard Rosen, managing partner at accountancy Conner Ash and chairman for the Americas at parent firm BKR.
In late August, the UK government also jumped on the bandwagon—reaching an agreement with the Swiss government and its banks. Leo Joyce, at London chartered accountants Blick Rothenberg, notes that as of May 2013 a charge of up to 34% will be levied on the value of assets in Swiss bank accounts opened before 2010, under the terms of the deal. A withholding tax on future profits will also be introduced. The agreement is expected to bring in more than £6 billion for Her Majesty’s Revenue & Customs, but will see the Swiss retain their banking secrecy as the tax will be collected by Swiss banks and passed on to HMRC. Swiss banks also agreed to alert the UK if they discover any customers trying to move money to other tax havens in order to avoid detection.
When asked what this means for the future of offshore financial centers such as Switzerland, Mike Scoltock, from London chartered accounts Blick Rothenberg, said the arrangement with the UK may put a dent in Swiss banks’ reputation for complete confidentiality, forcing them to diversify their business. However, he added that it was likely to retain enough of its reputation to continue as a major offshore financial center.
The Swiss agreement with the UK is only the tip of the iceberg. Germany has also reached an agreement with the Swiss regarding a one-off payment for funds held for a number of years. Scoltock says there have also been “mini tax amnesties” for plumbers and medical professionals in the last few years. It appears that the UK, Germany and other countries are looking to follow the lead of the US, which Scoltock says has always had a “far-reaching” tax system.