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UK accepts tax deal with Liechtenstein


Latest update : 2009-08-12

Liechtenstein and Britain have signed an agreement to encourage British clients with secret accounts in the Alpine principality to voluntarily disclose billions of pounds of untaxed money.The deal affects about 5,000 investors.

AFP - Liechtenstein raised the gate on its tax-haven fortress on Tuesday, making a deal enabling Britain to snare about 5,000 British accounts holders with up to 3.0 billion pounds in secret deposits.
But an association of trusts in the principality vowed to "utilise all our rights" to oppose the accord.
The agreement also appears to have a loophole in that account holders who do not volunteer to come clean may move their funds elsewhere and anonymously, although the British authorities make clear that they will try to track them down.
Liechtenstein said in a statement: "For the period between 2010 and 2015, the agreement provides special conditions to encourage the self-declaration of clients of Liechtenstein's financial service industry with tax arrears in the UK."
The deal will affect about 5,000 British investors with an estimated 2-3 billion pounds (2.32 billion euros, 3.30 billion dollars) in secret Liechtenstein bank accounts, according to the Financial Times which did not cite its sources.
British clients who come forward voluntarily would be offered "favourable conditions" in the settlement of their tax arrears.
Their details would be kept confidential and a reduced penalty of 10 percent would be levied, instead of the regular penalties which could reach up to 100 percent of the tax evaded, said Liechtenstein.
In addition, they would benefit from a reduced period for the assessment of outstanding tax claims from a regular 20-year limit to 10 years after March 1999, as well as the option of being taxed at a flat rate of 40 percent.
Liechtenstein explained that the flat tax option is a "very important part" of the deal as it would replace all other applicable British taxes such as national insurance contributions, inheritance, income and value added taxes.
"This can not only simplify the process of voluntary disclosure but can result in very meaningful tax savings in cases involving companies, trusts and other structures," said the principality.
British clients who do not comply would have to move their assets out of Liechtenstein, "but their names will not be transmitted to British authorities," a government spokesman said.
In a separate statement, the British Permanent Secretary for Tax, Dave Hartnett warned that tax evaders have "no alternatives" other than to settle their arrears.
"Those who make the mistake of ignoring the Liechtenstein Disclosure Facility will have their accounts in Liechtenstein closed and face penalties of up to 100 percent when HMRC (British tax collection service) catches up with them," he said.
PricewaterhouseCoopers tax partner Barry Murphy said it was difficult to assess if the terms offered by the exchequer were generous, as he pointed out that if enough tax evaders came forward, the amount ultimately would not only add to the British treasury's coffers but also leave a record of held assets.
"It depends on how you look at it. The HMRC probably knows there are people evading taxes. For these people, there is zero tax take... If the terms attract enough tax evaders to declare their assets, then it makes sense for the exchequer," he said.
For Klaus Tschuetscher, Prime Minister of Liechtenstein, "this agreement sets out a pragmatic path that includes in a cooperative way all parties involved: clients, financial intermediaries and both governments."
Liechtenstein's Bankers Association, which approved the deal, said the key point was that "no data would be provided" thereby protecting the privacy of the client.
However, the Liechtenstein Trustees Association which has about 400 members vowed to oppose the deal.
"To force clients into proceedings or to cease a client relationship arbitrarily is inconsistent with a mutual confidential relationship," it said in a statement.
The association's chairman Roger Frick added: "We... will do all that is possible in the future to protect the private sphere of our clients -- we will utilise all our rights to ensure that the agreement in its present form is not enacted."
Liechtenstein and Britain will also begin negotiations for a double taxation accord, which would allow for information exchange to clamp down on tax cheats.
The principality gave way to international pressure and announced earlier this year that it would ease strict banking secrecy rules and offer more assistance on matters involving tax offences.

Date created : 2009-08-11