Yes, we\’ve again got absurd estimations from the nation\’s favourite retired accountant.
The second claim is that the forthcoming deal with Switzerland on withholding tax will raise up to £6 billion for HM Revenue and Customs over the next four years. But in this case the question is why is the capital that underpins these tax evaded funds being ignored? If the withholding tax is to be at 35% over £4 billion of income must be involved each year to generate £1.5 million for HMRC. That implies that HMRC think there are more than £100 billion of illicitly held funds in Switzerland and yet they are doing nothing to recover the tax that should’ve been paid on those funds in the first place.
How much are we talking about when it comes to the amount potentially recoverable? Let’s assume that tax should have been paid at 40%. Lets assume a 50% penalty, and that is generous. And then let us go back and charge interest over a period of up to 20 years and it is very easy to imagine that the sum collectable should have been at least £100 billion. But HM Revenue and Customs has settled for £ 6 billion over the next four years.
He\’s not differentiating between income being paid to current residents of the UK and capital owned by current residents of the UK.
Just for the sake or argument, let\’s agree that the calculations in the first para are correct. People resident and domiciled in the UK are indeed holding £100 billion in Swiss banks.
Does this lead to the next step, that that £100 billion should have been taxed in the UK when it was first earnt and that thus there\’s £100 billion that HMRC could get?
Erm, no, it doesn\’t in fact.
A number of possible scenarios:
1) People who are resident in the UK make a bit of money, pay tax on having made it (or maybe they sell a house not subject to CGT, whatever) and decide that they\’d like to get themselves a bit of that Swiss banking. So they send it off to the Gnomes and yes, they\’re being very naughty in not paying tax on the interest but there is no tax liability at all on the capital sum.
2) This blog\’s man in the oil industry. He\’s paid into Switzerland. In the fullness of time he might well come back to live in the UK (erm, maybe not actually, Russian wife, house in Thailand, but, you never know). He would then need to pay UK tax on the interest he earns on his money in Switzerland but there\’s absolutely no suggestion at all that his capital sum will ever be subject to UK taxation.
3) An analogy of my mate around the corner (we\’ll assume he\’s UK, not Portugal based for this). He sold up in Oz to come back to the UK. His money from Oz is, having paid Oz tax, in Switzerland. Interest paid should pay UK tax: but not the capital.
And we can go on building such obvious cases where while current interest being paid should be taxed in the UK, no tax liability exists, whether we talk about tax compliance, avoidance, evasion or planning, on the capital sum.
Now how much of this is going on and how much of that £100 billion really is straight out evasion, who knows?
But expect to see that Ritchie number, £100 billion, spread around the media. Despite the fact that it\’s entire bollocks.