Switzerland: this is not pragmatism

November 2nd, 2010

David McNair of Christian Aid has an article on Comment is Free at the Guardian this morning. Talking about the proposed tax agreement with Switzerland he says:

The government might call it pragmatism but its talks with Switzerland, about how to tackle the £100bn or so which Britons have hidden in Swiss bank accounts, suggest that it is suffering from both naivety and a severe case of beggar-thy-neighbour.

What the two governments have said is that they will try to do a deal to give the UK some of the tax that its citizens owe on their Swiss billions – while still not revealing the identities of those same tax dodgers.

When the Treasury signed a declaration of intent last week with Hans-Rudolf Merz, a Swiss federal councillor, it would understandably have been thinking of the large amount of tax that will flow from Swiss banks into Treasury coffers, if and when the final deal is done.

But this is naive. Sophisticated tax dodgers will already be moving their money on to less co-operative tax havens, to remain well ahead of the HMRC. Negotiations on a UK-Swiss tax deal are not even due to begin until early 2011, so they have plenty of warning.

He is right, of course. As he is when he says:

The other problem with the threatened UK-Swiss pact is more serious. Such a deal would undermine the UK’s commitments to start healing the damage that financial secrecy inflicts on the global economy – and especially developing countries.

That secrecy, for instance, allowed corrupt dictators to hide the millions they have stolen from countries such as Haiti, the Philippines and Zaire in Swiss bank accounts. It has also allowed rich individuals and companies across the world to dodge tax by concealing their assets in tax havens which, like Switzerland, elevate secrecy above all else.

The price for this secrecy is paid by all of us. But the gravest burden is borne by those living in poverty all over the world, who depend on schools, hospitals, justice systems and other public services being funded by tax revenues. Quite how much tax dodgers deprive poor countries of each year is disputed but there is a broad consensus that it is more than the $120bn (£75bn) or so that those countries receive in aid each year.

And this deal will destroy any chance they have of recovering that money. As he concludes:

The good news, though, is that it is not yet too late to change ministers’ minds.

But will that happen given the pro-tax haven stance of this government? Or are we praying for a miracle?

This post was originally published on the Tax Research UK blog.

Written by Richard Murphy

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