SECRET SWISS BANK ACCOUNTS ARE NO LONGER AN OPTION

Switzerland may be brought into line

Thursday February 16,2012

By Neil Clark, Political commentator

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LET me tell you about the very rich.

They are different from you and me, the American novelist F Scott Fitzgerald once wrote. One way in which the very rich are different from you and me is their use of tax havens.

While ordinary members of the public have little opportunity to escape paying taxes, the very rich have the possibility of opting out of the system by transferring their money to secret bank accounts in countries where their money is subject to little or no tax. Think that’s a tad unfair? Well, so too does the US President Barack Obama and he’s determined to do something about it.

In May 2009 Obama’s administration, eager to reduce its country’s record budget deficit, endorsed tough new legislation designed to crack down on the world’s most secretive tax havens. The US President pledged to “detect and pursue” Americans who evaded taxes by hiding their money in places such as Switzerland and the Cayman Islands.

“If financial institutions won’t cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly,” he announced.

Evidence of this new get tough policy can be seen by the indictment, issued earlier this month, by US prosecutors against Wegelin & Co, Switzerland’s oldest private bank, which was charged with conspiring to help wealthy Americans evade taxes on more than £760million worth of assets.

The case is a historic one as it is the first time that the US authorities have accused a foreign-owned bank of helping American citizens to defraud the Revenue.

The action came just one month after US authorities had indicted three client advisers at the St Gallen-based bank on similar charges. It’s not just the US authorities that have tax havens in their sights.

The UK and Germany have signed treaties with Switzerland under which Swiss banks will impose a “withholding tax” on the assets of clients from their countries and then transfer that money to the tax authorities back home. This follows on the compilation of a “name and shame” black list of tax havens after a pledge made at the 2009 G20 meeting.

There are of course those who will strongly oppose such moves. Some will argue that the very rich should have the freedom to put their money exactly where they want to.

Let’s face it, isn’t it everyone’s dream to turn up one day in a Swiss bank with a suitcase full of cash and deposit it in a secret bank account free from the prying eyes of tax authorities? Others will say that it’s up to each country to set rules regarding taxation of money held in bank accounts and the level of banking secrecy.

If Switzerland wants to tempt the global elite into depositing their funds there into secret untaxed bank accounts, then surely it is their concern and no one else’s? But as persuasive as some of these arguments are, it’s important to see the bigger picture.

The reality is that the existence of tax havens means that governments lose vast amounts of revenue which could be spent on building new schools or hospitals, raising pensions, or by giving tax cuts to the poor and the squeezed middle-class. It’s a classic case of the majority losing out because of the greed of a small minority.

In Britain a 2008 report by Richard Murphy of Tax Research calculated that tax havens cause a loss to the UK of at least £18.5billion a year – an amount large enough for 4.5p to be taken off the basic rate of income tax. Meanwhile, a 2009 report by Oxfam claimed that developing countries miss out on up to £79billion every year in lost income from offshore assets held in tax havens.

“Our leaders can no longer afford to stand idly by whilst tax havens take billions of pounds from the pockets of taxpayers in rich and poor countries alike,” Oxfam‘s Sebastien Fourmy said.

“Reform of tax havens would be an easy win for our leaders that would benefit ordinary people at home and abroad alike. There is no longer any excuse for delay.”

We must also not forget that at least some of the money that is stashed away in tax havens has been earned by taxpayers’ help in the first place.

For instance, a billionaire UK businessman who keeps his money in a secret tax-free account in Switzerland is likely to have benefited from taxpayer- financed roads to transport his goods, taxpayer-financed education to train his workforce and a taxpayer-financed police force to guard his property.

Sometimes too, the businessman will have received taxpayer subsidies to his business, by way of government grants. For someone to make vast sums of money out of Britain but not want to pay his/her taxes here is fundamentally wrong: with great wealth should always come responsibility.

During times of plenty, and fiscal surpluses, we could expect governments to be more relaxed about the existence of tax havens. However, at a time when public finances are in their worst state for many years, it becomes a moral imperative for governments to try to close them.

“This is now a battle about tax revenues to pay for essential services and governments are going to win that battle,” predicts tax expert Richard Murphy.

“Switzerland and its fellow abusers are on notice to find something else to do: the days of tax havens are numbered.”

Of course no one likes paying taxes. But if tax havens are closed then it is likely to mean that most people will pay less tax. It will also mean that in one important aspect, the very rich will no longer be quite