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Tax deals make sense for finance ministries

Friday 26 August 2011 - by Chas Roy-Chowdhury

The tax deals brokered by Germany and the UK with Switzerland this month are the best the EU could have hoped for, argues Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants.

The tax deals between Switzerland and the UK and German governments are very innovative. This is a wake up call to tax dodgers, and will flush some of them out of the system.

Governments are calling it a 'victory'; while critics are saying it is unfair to honest taxpayers. It is actually a bit of both: in the UK, those hiding funds from the taxman overseas still won't be paying the full whack, but they will, for the first time, be paying something.

It brings to mind the saying 'a bird in the hand is worth two in the bush'.

These bilateral deals are actually as good deals as EU member states' governments could have got. The Swiss were never going to give up banking anonymity in one fell swoop, but these deals are the first chink in the armour.

Some have said that the deals mean the Member States are giving up tax sovereignty; but this is a nonsensical over-reaction that misses the bigger point: it is better to have something than nothing, and the deals leave the door open for prosecutions after 2013.

Certainly, if I had money held in a Swiss bank account that I hadn't declared I would be very nervous right now, anonymous or not. In the UK, HMRC are allowed to ask the Swiss for the account details of up to 500 individuals per year; for those with Swiss accounts it's like playing Russian Roulette with more than one chamber loaded. It's not a lottery I would like to be part of.

In the normative sense the deals are not fair for EU taxpayers, but they are realistic deals, and an important step towards getting finance ministries a significant part of the money that it is owed.

The bilateral agreements could cause some with Swiss accounts to move their money elsewhere, but tax evaders are starting to run out of friendly havens thanks to some good work by the various national governments.

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