Tuesday, March 20, 2012

European Commission queries UK - Swiss deal

Yesterday we criticised a new protocol signed between Switzerland and the UK, amending the so-called "Rubik" agreement of October last year which the European Commission had objected to. Yesterday the Swiss government said that with the new protocol,
"The concerns of the EU Commission regarding compatibility with EU law have been removed."
and Vanessa Houlder in the Financial Times declared that
"Officials signed a protocol in Brussels that will modify the deal so it is compatible with existing EU laws on evasion."
We asked the European Commission whether this was true or not. And the reply came back from spokeswoman Emer Traynor:
The Swiss press release is its own interpretation of the situation - it's not for the Swiss government to profess the Commission's position.
. . .
For the moment we don't have a reaction, because we were only informed about the revised agreement being signed at midday today. So we'll have to see the exact wording first.
. . .
We'd hope though that it would reflect the good discussions that the Commission has had with UK over the past months, from which we believe there was a common understanding on what needs to be changed in these agreements to make them compatible with EU law. Commissioner Semeta was extremely clear in his letter to Member States on 5 March as on the parameters that Member States must respect in such bilateral agreements with CH. He remains firm on that."
European Commission President José Manuel Durão Barroso said:
On the tax question I want to tell you one thing - the Commission will never accept a bilateral agreement by a member state with a third party like Switzerland if it does not fully respect community law. So we will look at these agreements and we will make sure that community law is fully respected.
In short, the Financial Times might have got the story right, and it might not. It does have some additional detail about inheritance taxes, which is interesting, and which we'll look at when we have more details.

Still, even if Rubik is compatible with EU law, then there will be little point in anyone signing up to it. Even the original version was useless, and although we haven't seen a statement from UK Revenue and Customs - they don't seem to have even issued a press release yet - it seems clear from what has been said that the gaping, fatal loopholes that suffuse the whole deal, leaving it like a Swiss cheese, have not been filled - except, perhaps, with cunning little tax-advising mice.

What we can say for sure is that Dave Hartnett, the head of the UK Revenue and Customs authority was being economical with the truth when he said:
“What was already a highly effective weapon to tackle offshore evasion has been further strengthened."
Highly effective? We have publicly and privately asked HMRC, along with the UK accountancy profession, the Swiss Bankers' Association and the Swiss tax authorities, to explain why our analysis revealing the disastrous, hole-riddled uselessness of the whole thing is wrong. We are still waiting for someone to come up with a serious objection to what we said.

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