Friday, February 03, 2012

UK Channel 4 on the dog’s breakfast of the UK-Swiss tax deal

From the Treasure Islands site:
Excellent report by Faisal Islam on Channel 4 last night on the UK-Swiss tax dispute, featuring yours truly, and questioning the fantasy numbers put out by the UK's tax authorities, HMRC.

Take a look.

In case you doubt my statements in this interview, take a look at the Tax Justice Network analysis of the Swiss-UK tax deal (of which I was the main author). Have a go and see if you can fault our analysis. We have sent this analysis to HMRC, to the Swiss authorities, to a number of private practitioners, and nobody - anywhere - has been able to knock down our numbers. The only responses we have had (apart from 'this looks solid to us') are along the lines of 'why would HMRC not want to do the right thing?' (pray, under the leadership of 'Handshake' Hartnett, would they ever do the wrong thing?)

We also asked HMRC to provide us with the basis of their calculations - they say the UK-Swiss tax deal will yield £4 - £7 bn, which understandably has got a number of politicians behind the deal. Our analysis of the original deal suggests they will be lucky to get ten percent of that. HMRC have refused our request for the calculations that back their £4 - £7 bn figure, and they even refused a Private Eye freedom of information request on this.

Now there's a newish wrinkle in all of this. Since the original deals were signed and our analysis done, the European Commission has intervened to say (as we predicted, see Section 4.4 in our analysis) that the deals conflict with European law and cannot go ahead. What is happening now is that the Swiss, the UK and the Germans (who have a similar deal with Switzerland) are trying to work out a fudge to find a way to carve out those bits of the deal that conflict with EU law, and still go ahead. I asked an EC spokeswoman for details of this on January 30th, and she replied as follows:

"There has certainly been very constructive engagement by DE and UK in resolving the problems that we have with these bilateral agreements, and they have agreed to carve out of the bilateral agreements the parts that are not in conformity with EU law. Commissioner Semeta met with Germany's Finance Miinsiter in the margins of the ECOFIN last week, and certainly there was consensus on what needs to be done for these agreements to be compliant."

The EC hasn't approved the deals - far from it. But the three parties think they can see a way to salvage something of them. What we now know - and I don't have time or space to go into it here - is that the bits that will have to be carved out are the bits that matter. The rest, if any deal does come to fruition, which is in serious doubt, will be a ridiculous and pointless dog's breakfast - great for tax advisers to cream off some fees for 'advice' - but particularly unpleasant for beleaguered UK (and EU) taxpayers.

In addition to all this, there is considerable resistance inside Germany to these deals, notably by the powerful SPD (Social Democratic Party) and even some opposition inside Switzerland (though it's the EC position that is the one that matters here). If some shabby deal (even shabbier than the one we analysed) were to be pushed through, it would be primarily pushed by the Swiss as part of a complex chess game to try and scupper some brilliant EU legislation that is coming through soon - which would enable the UK, Germany, and many other EU countries to get serious about tax evasion for the first time ever. And raise far more from Switzerland than these deals ever could. The TJN analysis contains some discussion of this political chess game, and there is more here and here.

The whole thing is a failure and a disgrace, from top to bottom. It's a zombie deal: in effect, it's already dead, but it still seems to be kicking and flailing around, at least for now.

Endnote 1: At one point, Islam said 'avoidance' when he ought to have said 'evasion.' This is quite common among journalists, and one of the biggest reasons is UK libel law. If you say 'evasion' then you're accusing someone of committing a crime, and if you say 'avoidance' you are much safer. Probably necessary in some stories, though not in this case. For information: evasion is by definition illegal, while avoidance is by definition not illegal (although it also by definition involves getting around the law). There's a huge grey area between the two poles.

Endnote 2: a couple of people have said that I looked cold while being interviewed. It was freezing. Brrrr!


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