A long-awaited tax deal with Switzerland has been criticised for letting the Alpine country keep the details of UK clients with private bank accounts secret, provided the account holders pay a "lenient" one-off levy.
In accordance with the Swiss government's desire to pursue a "white money strategy", UK taxpayers with undeclared assets in Swiss banks will now be able to make a one-off, "clear the slate" payment of between 20 and 34 per cent on their total assets and retain their anonymity.
The exact amount will depend on the age and balance of the account up until the end of December 2010, with the agreement coming into effect from January 2013.
A witholding tax will be levied against future investment income and capital gains and will be set at between 27 and 48 per cent, depending on the category of capital income. Swiss banks are also expected to make an upfront payment of approximately £400 million to the UK Government, to ensure a minimum income fom the retrospective taxation of existing assets.
Many parties spoke in praise of the new deal, including Patrick Odier, chairman of the Swiss Bankers Asssociation , who said he was "grateful that clients have been offered a fair solution for regularising their assets".
Tax expert Richard Murphy criticised the arrangement however, saying: "What this means is that we have now passed control of a UK taxpayer's affairs to the Swiss.
"In order for the Swiss to know what tax witholding rate should be applied to the accounts of the UK tax payer with undisclosed assets, that person will have to make complete disclosure to the Swiss authorities of what their UK income is, even though the UK authorities will be denied the same information."
Mr Murphy added that the one-off levy seemed overly lenient, considering that "most money in Switzerland got there illicitly".
"At a time when the Government is demanding respect for the law, high moral standards and responsibility for all in society one group of criminals, those who have deliberately and knowingly broken the law by tax evading in Switzerland, are going to be let off without paying anything like what they owed even in tax, let alone in penalties," he said.
Alternative options to coming clean to Swiss authorities will be for UK taxpayers to leave their assets undeclared, in which case Swiss banks will be obliged to declare their identity and assets to the UK taxman, or to move all their assets to another jurisdiction although an enhanced exchange information agreement between the two countries means that Switzerland will be obliged to say to where that money was transferred.
To prevent new, undeclared funds from being deposited in Switzerland, Britain will be able to submit requests for information providing it has the name of the client. The number of these requests will be limited to 500 and there must be plausible grounds. So-called "fishing expeditions" will not be permissible.