Swiss tax deal is a victory for the UK tax payer

The UK's deal with Switzerland to remit over £5bn of tax from undeclared British account holders there is a victory for the British tax payer, no matter what some commentators may think.

I was planning to blog about the tax deal the UK has just made with Switzerland this morning, but I then got an email from a regular reader on the subject that makes all the points I would have made, plus a couple more. So I'm copping out. Below are the views of MoneyWeek reader Nick Reid.

"Waking up this morning we hear that the UK Treasury has signed an agreement with the Swiss authorities to raise over £5bn from undeclared bank accounts held by UK citizens in that country. A source of unalloyed joy, one might think; £5bn fewer cuts and progress towards greater financial fairness and opening up of the murky world of offshore tax havens. A "landmark agreement", crowed the Financial Times.

"However, listeners to the BBC's flagship Today programme heard mainly from the left's favourite tax expert, Richard Murphy of the Tax Research blog, who called this deal "diabolical and stupid" and a deliberate act by Osborne and Cameron to encourage criminal tax evasion. Richard Murphy appears to have two principal criticisms.

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"The first is that by agreeing to this bilateral agreement with the Swiss, the UK has deliberately scuppered wider EU negotiations over the EU Savings Tax Directive that would have forced even more disclosure from the Swiss banks.

"The agreement as it stands will allow the Swiss authorities to take tax from bank accounts and pay this over to HMRC -but without revealing the account holders name. While it is true that greater banking disclosure is a good thing, is it at all likely that the EU would have been able to force this on the Swiss?

"Not only would this require full EU co-operation (the evidence of negotiations on fishing policy suggests this isn't at all likely) but also a popular mandate from each Swiss canton. The fact that the German authorities (and Germans havefour timesthe bank deposits of Brits held in Swiss bank accounts) have been negotiating independently of the EU as a whole, and came to a similar agreement to Britain a few weeks ago, suggests that, in all practicality, a stronger EU agreement wasn't likely.

"Secondly, Mr Murphy believes that tax evaders are being "let off" and criminal activity is being endorsed by a Tory government.

"Well, this Swiss agreement comes in a succession of previous banking disclosure agreements signed by the Labour government. In particular, with the Channel Islands and Isle of Man in 2007, and Liechtenstein in 2009. It is difficult to paint this as nasty Tories making life easy for their tax evading friends.

"More importantly, although the Swiss authorities have largely retained their banking secrecy, they will allow HMRC to inspect the accounts of 500 UK citizens every year. Now, if you have assets in a Swiss account that you have failed to properly declare, are you really going to take the risk that you won't be one of the 500 investigated this year, or next year, or the year after? A prison sentence beckons if you are investigated and found guilty of illicitly obtained assets.

"Moving your assets out of Switzerland has been suggested -but to where ? How many people happy to have $10m in UBS in Geneva would be as happy with their money in a tin-pot island in the Caribbean? And moving ill-gotten assets from one bank to another immediately brings you to the attention of the money-laundering regulations.

"So, despite Richard Murphy's gloomy protestations, this is a great deal for the UK taxpayer. And a step forward in greater financial transparency."

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.