Ministers were forced to defend the government’s agreement to tax individuals with money stashed in secret Swiss bank accounts without disclosing their identities amid criticism that the move was a light sentence for evasion.
While Labour welcomed the deal that is expected to attract about £6bn of tax revenue from Swiss accounts, it raised concerns that some tax dodgers would be let off the hook.
“The government should ensure that all those who have broken the law face the full penalty,” said Chris Leslie, shadow financial secretary. “There is a significant risk that some who have taken part in criminal tax evasion will escape by paying less than if prosecuted.”
Under the terms of the agreement, all Swiss accounts opened by UK citizens will have to pay a one-off charge of between 19 and 34 per cent, depending on the type of funds held.
Account holders will then be hit with a new “withholding” tax of 48 per cent of undeclared income and 27 per cent of undeclared gains. Crucially, though, their identities will remain secret.
Other politicians and campaign groups expressed concerns that Swiss account holders would end up paying less tax than those who kept funds in the UK.
Michael Meacher, a Labour MP, said: “You have to give it to Osborne: he can dress up a pig’s bladder and make it look like a silk glove.”
Meanwhile, Loretta Minghella, director of Christian Aid, said the deal would “seriously damage” global efforts to curb tax dodging.
However, David Gauke, exchequer secretary to the Treasury, hailed the agreement as a victory. “If anyone wants to maintain their Swiss banking secrecy they are going to have to pay for it very substantially, potentially losing over a third of their assets,” he told the BBC.
Accountants felt the agreement was realistic given that the government cannot force the Swiss authorities to hand over details of those who were deliberately evading tax.
“This is a pragmatic deal,” said Tom Rowbotham, a partner at Deloitte. “It aims to secure what the government hopes to be billions of pounds of tax that would otherwise remain uncollected and at the same time allowing Switzerland to maintain banking confidentiality.”
Some observers said the fact that Switzerland will not disclose personal details of account holders would help preserve its status as an international financial centre.
“The terms will undoubtedly be attractive to those who are prepared to pay a premium to maintain their anonymity,” said Simon Airey, director of national tax investigations at DLA Piper, a law firm.
Account holders whose priority is reducing their tax charges, however, are thought likely to seek more favourable terms through a previous agreement with Liechtenstein.
The Liechtenstein Disclosure Agreement is more lenient – account holders typically lose only about 10 per cent of their funds – but does not protect their identities.
Accountants expected many wealthy clients would be prepared to sacrifice their anonymity for the sake of the lower charges.
“Liechtenstein provides a much cheaper way of clearing up past liabilities,” said Stephen Camm of PwC. “The difference is really significant.”
UK citizens could also channel money to other tax havens, such as Singapore, although the choices are becoming increasingly limited.
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