Thursday, October 06, 2011

The UK signs its Swiss tax deal

From the Treasure Islands blog: a short article as an immediate reaction to the UK-Swiss tax deal. A much longer article, complementing this, will be posted on the TJN site very soon.
The UK signs its Swiss tax Swizz

It's happened. First Germany, now the UK.

And the text of the agreement, published here, proves just how exactly correct my Guardian article was.

There's lots to say - and I will do this by the end of tomorrow - but I will for now just point out one thing. First, from my Guardian article:

"Foundations and discretionary trusts are exceedingly slippery. Although someone is always ultimately behind them, from a legal point of view nobody has the rights to their assets. That is the whole point of these things! And if you can't identify who has legal rights to the assets, you can't say if the person ultimately behind it is British, German, Nigerian or Martian. So the bank can't apply the UK-Swiss deal to it and withhold the upfront capital tax."

Discretionary trusts are the bread and butter of criminals and tax evaders. Here, in essence, is how they work. Assets are held by the trust, but crucially the beneficiaries of the trust are not fixed, and instead the question of who is to benefit is left to the discretion of the trustees who manage the structure. So you might have several potential beneficiaries, but none of them actually is entitled to the assets or their benefits until the trustee uses his or her 'discretion' (another highly slippery concept, especially when wielded by an offshore trustee) and shells out to that particular person at some point in the future. Only then will you know that that individual was entitled to that benefit. But until such a payment is made, you simply cannot say who the beneficiary is. There actually isn't one. It's all up in the air. (I did say they were slippery - and this is not the half of it. For a deeper dive into the deviousness of offshore trusts, take a look at this primer on trusts that I wrote a while back.) Foundations are just as slippery, using different mechanisms, but the point is again that there isn't an identifiable beneficiary.

Now look at the latest UK-Swiss deal. It says, absolutely clearly:

"An individual resident in the United Kingdom is not considered to be a relevant person with regard to assets of associations of persons, asset structures, trusts or foundations, if it is not possible to ascertain the beneficial ownership of such assets, e.g. due to the discretionary nature of the arrangement."

Exactly. So beneficiaries of discretionary trusts and foundations are explicitly ruled out. This, on its own, will drive a coach and horses through the deal. And before anyone claims that you can't tax these things, you can. The EU has some tricks up its sleeve which will work. But of course these sordid deals go a long way to undermining the EU's work.

There are a whole lot of other loopholes, which I will write about to shortly.

I predict that the UK will not get a tenth of the sums that have been promised.

Before I wrote my Guardian article, one might have put these deals down to incompetence on the UK government's part. Now we can no longer blame incompetence. First, the fact that these gaping loopholes have been exposed, but they still decided to press forwards, means they don't care. Second, the paragraph above is an explicit carve-out that shows that they know exactly what they are doing.

I can only conclude, given that they now know this deal won't collect the money, that it has been conducted for malign purposes, to preserve financial secrecy on behalf of an unaccountable and wealthy élite.

Can anyone think of another explanation? Please let me know.


Anonymous Anonymous said...

"Second, the paragraph above is an explicit carve-out that shows that they know exactly what they are doing"....
It seems that this the masterpiece of the Swiss (..bankers) negotiators !!

5:37 am  

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