UK-Swiss TIEA under threat of EU orders, says Baker Tilly

An agreement between the UK and Switzerland on exchaging tax information could fall foul of European Commissioners concerned that the mechanism for applying a levy on foreign held accounts in Switzerland amounts to an inter-governmental agreement, for which approval from Brussels is required.

Tax specialists at Baker Tilly in London said that the concerns also stretched to a similar tax information and exachange agreement (TIEA) signed between the German and Swiss governments.

The agreements are meant to facilitate the discovery of assets on which tax has not been paid by UK or German taxpayers.

The EU is looking into the matter because it believes that “as Swiss banks would account for the levy as a lump sum rather than a tax on named individuals they amount to an inter-governmental agreement for which EU ratification is required,” Baker Tilly said.

“With EU wrangling set to further complicate the picture, perhaps we will now see the UK/Swiss tax agreement renegotiated to remove the anonymity of individual tax evaders and, in the process, bypass the need for specific EU approval of the agreement.”

Any such renegotiations may adopt the model applied in an agreement announced between the US and Switzerland in September 2011. That could lead to Switzerland handing over details of individual Americans suspected of using Swiss bank accounts to avoid paying US taxes. Unlike the agreement currently in place beteween the UK and Switzerland, there is no anonymity for the individuals.

Baker Tilly believes that with a US/Swiss deal in place allowing individuals to be identified it may become easier for the UK/Swiss deal to be renegotiated this way following possible pressure from the EU.

Tobin Tax

On other tax matters, Baker Tilly says it does not believe the EU will be able to implement the so-called Tobin Tax – or financial transactions tax – following the increasing amount of discussion suggesting that any funds raised would go into the EU’s general expenditure.

“A new tax which simply raises funds to be spent by national and supra-national authorities seems to lack any form of appeal and will certainly strengthen the cause of the Tobin Tax’s opponents,” it said.

“Yield estimates for the Tobin Tax are varied and uncertain, but an annual figure around $4 billion is often mentioned. Tiny taxes can be profitable, for example, UNITAID receives around $212 million a year from an air ticket levy, which ranges from $1-$40 on flights from Chile, France, Madagascar, Mali, Mauritius, Niger and the Republic of Korea. UNITAID uses this money to help increase access to treatment for HIV/AIDS, malaria and tuberculosis for people in developing countries.

“With opposition from the US, Canada and other counties, a global Tobin Tax is unlikely to be introduced any time soon. As David Cameron refuses to consider a Tobin Tax until it is adopted globally, discussion at the recent G20 meeting centred on whether Europe might adopt the Tobin Tax in a limited way with an exemption for financial transactions where one party is based outside the EU.

“On balance, comments coming out of the G20 favoured the implementation of the Tobin Tax as a means of stabilising the financial system and reducing over-trading by institutions. Practical implementation seems a long way off.”


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