Ritchie has got all hot under the collar about the deal that was done with the Swiss banks.
Amongst the outcomes of yesterday’s Public Accounts Committee hearing in which HMRC were interviewed about their performance was the revalation that the UK – Swiss tax deal that was scheduled to pay the UK £3.1 billion this year may not deliver a quarter of that sum.
There’s a good reason for this too. Essentially, very little tax was actually due.
From day one I named this deal as naive and a deliberate act by the UK to undermine the European war on tax haven abuse. I argued the Swiss could not be trusted to deliver (as is now clearly proven to the case) and that the UK’s rule of law was undermined by allowing Swiss banks to operate parts of the UK tax system – with a tax rate discount applied to encourage abuse in the future. And I and others argued that this deal could not deliver the sums claimed for it.
We have been proven right, yet again. No wonder Margaret Hodge said it was time for HMRC to listen to the tax campaigners yesterday. Our ability to predict tax risk seems to be 100 times better than that of HMRC.
That however leads to the next obvious question, which is whether HMRC were wilfully blind on this issue, as I suggested many times in 2011 and 2012 when referring to this issue, or were just incompetent. I’d like to believe the latter. I remain to be convinced.
Fairly stron words from the Murphmeister there.
And here’s what actually happened. Murphy, the Tax Justice Network, Richard Brooks, they were all claiming that there was some vast untaxed sum in the Swiss banks. Which Britain should, obviously, start taxing.
So, off everyone went in order to find out how much there was in the Swiss banks which was not taxed and how much tax there could be gotten from it. So far so good. Then we found out that:
According to the Swiss Bankers Association (SBA), the deal does not apply to most UK nationals who keep their cash in Swiss banks because they are not domiciled in the UK.
There wasn’t actually that vast sum of cash to tax.
To put it in its most polite form. The claim was that there was $40 billion untaxed. This was an error.
In order for that money to be righteously taxable by the UK It had to be owned by UK citizens both resident and domiciled in the UK.
If you are resident but non-domiciled in the UK then you do not pay UK tax on foreign money that you keep in foreign. So, non-doms keeping cash in a Swiss bank is not UK taxable.
Similarly, if you are a UK citizen domiciled in the UK but non-resident your earnings are not UK taxable. So, Tim Newman’s cash from being an oil engineer are not UK taxable. And yes, some of those are indeed stashed in a Swiss bank.
The $40 billion estimate included (to give this the most generous gloss possible) all three types of UK citizen’s cash. That held by residents but non-doms and doms but non-residents which are not taxable and also that by residents and doms which was indeed tax evading and thus righteously taxable.
As it turned out the first two groups were the vast majority of this money. The third the minority: not all that much of a surprise as most people do obey the law most of the time.
We can thus see where the error was. It was in the original claims of how much tax was being avoided. Thus it’s Murphy, Brooks, the TJN, who were wrong. And it is now them who are screaming that HMRC got it wrong. Not so. There just never was that much money to tax. Which is why they’re screaming and obfuscating so much now. To make sure that no one thinks about this fact.