Thursday, October 27, 2011

Tax advisers still can't explain why our UK-Swiss analysis is wrong

The UK's Telegraph newspaper has written a reasonably fair report about our analysis of the fatally flawed UK-Swiss deal, accurately summarising our position (although they call them 'alleged loopholes' instead of the proper term, 'loopholes'. (Note that nobody, anywhere, has said that we are mistaken on this.)

But we do feel it is worth responding to an opinion in the article given by Fiona Fernie, tax investigations partner at BDO. Sher says our report contains 'sound points' - then goes off in some very strange directions. Such as:
"We have heard from some Swiss banks that they will not be allowing movement of funds between their own branches."
Is she serious? Really?

Even if some Swiss banks do not actively (and there is a slippery word) help their customers move to foreign branches - though they may well do so - customers are quite capable of doing this by themselves. For her proposal to have any chance at all of working, Swiss banks would have to block their customers' funds and prevent them withdrawing anything, to stop them moving money out of their accounts and then on to other branches elsewhere, either with the same bank or a different one. And if the banks were to do that, we would quite soon see terms like 'run on a Swiss bank' and 'Swiss banks default' on a lot of newspaper front pages. We haven't, to be frank, noticed this happening.

But Fernie has more:
There are also rumours - which have not been confirmed - that for banks who do allow movement to other branches in different countries, they will only allow a percentage of funds to be moved, in case they are found liable by HMRC under the agreement.
Well, ditto our earlier argument on this point. But in any case, she is resorting to unconfirmed rumours to try to counter our study? This is a tax partner?

Next, a slightly more focused point:
"Those who are beneficiaries of genuine discretionary trusts may escape but there are a lot of other foundations and trusts arrangements where it will be quite obvious who the owners are. They are unlikely to escape."
Well, perhaps they might be unlikely to escape if they just sit there (though in any case they may still escape in other ways). But that's just the point: HMRC has given them a leisurely 20 months to do something about this. If they've gone to the trouble to set up a trust in the first place, they will go to the trouble again - especially since the capital charge gives them a massive additional incentive to do so. Once again we should point out: this is not a representative sample of the UK taxpayer population we are talking about here, but a selection of those who have already decided to opt for criminal tax evasion.

But also - it's known that the large majority of tax evaders are already using these structures like discretionary trusts. No, Fernie is absolutely wrong.

And there is more:
"It is also worth noting that the agreement does say that banks will have to provide information to HMRC on where money is being moved to. This will no doubt be utilised by HMRC in order to help them decide 'where next'".
Once again, is this supposed to be serious? Look at Section 4.6 of our report to see how ridiculous this assertion is.

The second last section (6.2) of our report is headlined "This is a Source of shame for the British accountancy profession." We have seen accountants line up to defend HMRC's deal, and yet not a single one of them has offered a substantive and credible rebuttal of any of the particular points made in our report. Not a single one.

This deal cannot be allowed to stand, unless the combined analytical might of the British accountancy profession, and HMRC, or anyone else, are able to come up with a detailed and credible explanation of how we got it wrong.

We await a serious response.

Finally, we are pleased to see the European Commission looks likely to take action (more here) against the Swiss deals with Germany and the UK.

But why does the UK have to put itself in this untenable position in the first place?

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