- 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.
Under the deal, money held by British residents with Swiss banks will be subject to a levy between 19 and 34 percent of their 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 industrialized countries.
From 2013 onwards, 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 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.
Britain’s finance minister George Osborne has vowed to crack down on tax evasion as he has set out to eliminate a budget deficit of over 10 percent over the next 4 years with a tough austerity program that includes unprecedented cuts in public spending.
The Swiss finance ministry said the countries have decided to facilitate mutual market access for financial institutions.
“Likewise, the problem of purchasing data relevant for tax collection purposes has been resolved,” the ministry said.
“The package also includes a solution for the problem of possible prosecution of bank employees.”
British authorities are investigating hundreds of HSBC customers suspected of tax evasion after it obtained details of around 7,000 Swiss accounts at the bank from another tax authority, a source at UK tax office HMRC told Reuters in June.
However, the original source of the data is a former employee at HSBC’s Swiss unit, who stole details on thousands of Swiss client accounts which have since found their way into the hands of tax authorities around Europe.
The HMRC started scrutinising its share of the haul last year, sending letters to hundreds of people suspected of hiding money offshore in September.
Efforts by cash strapped western governments to crack down on offshore banking have put pressure on Britain’s own island tax havens in the Channel Islands and Isle of Man.