Following on from the global financial crisis, in 2010 countries worldwide began the painful process of slashing their budget deficits with spending cuts and increased taxation, mainly targeting w
Following on from the global financial crisis, in 2010 countries worldwide began the painful process of slashing their budget deficits with spending cuts and increased taxation, mainly targeting wealthier taxpayers. In Part 1 of this article I looked at the key tax issues over the first six months of the year which included the continuing clampdown on tax evasion.
Here?s what happened next:
HM Revenue & Customs (HMRC) reveal the results of the UK?s recent tax disclosure facilities, the New Disclosure Facility and the Tax Health Plan. The NDO yielded around ?82 million from approximately 5,500 disclosures and the THP generated around ?9 million from approximately 1,500 disclosures.
Guernsey announces that, from 1st January 2011 and no later than 1st July 2011, it will move to automatic exchange of information under the Savings Tax Directive. The withholding tax option will be abolished.
German investigators carry out raids on 13 branches of the Swiss bank Credit Suisse in Germany where employees are alleged to have helped over 1,000 German clients evade taxes.
Tax authorities in the German state of Schleswig-Holstein are reportedly offered a new tax data disc, allegedly containing information on around a hundred German clients suspected of having evaded taxes through accounts with Liechtenstein Landesbank (LLB) amounting to an estimated ?500 million.
In a drive to gather information on how offshore accounts are marketed, HMRC sends out 600 letters to offshore account holders who came forward during the UK?s disclosure facility in 2007. The letters invite recipients to answer ?a few short questions about how you opened, operated and maintained your accounts? in a phone call with a tax official. Tax lawyers are concerned it is a ?fishing trip? on the financial affairs of wealthy taxpayers, which HMRC denies.
Ground breaking new laws come into force in Liechtenstein whereby bank accounts held by UK residents will undergo a compulsory tax audit. The legislation is in conjunction with HMRC. All UK taxpayers suspected of owing tax will have to make a declaration under the Liechtenstein Disclosure Facility or have their accounts closed. Banks, other financial institutions and advisers will have three months from identifying a client as having evaded UK tax to notifying these clients that they must disclose.
HMRC investigates over 200 ?extremely wealthy? UK taxpayers who are suspected of tax evasion by holding accounts at HSBC in Switzerland. Many millions of pounds are thought to be involved. The letters are known as Code of Practice 9 which are used for the most serious form of tax enquiry. A HMRC spokesman said: “This is part of our drive against tax evasion. The days of hiding money offshore to evade tax are now over.”
In Spain the Council of Ministers approves the Spanish budget for 2011. The top rate of income tax levied by the state will jump 2% from 43%, with the introduction of two additional tax bands from 2011. The government anticipates that the tax rises in the Budget will boost revenue by ?170-?200 million.
In France the Finance Bill is put before the Council of Ministers. It contains tax hikes targeted at the well-off with a 1% increase in the top rate of tax, capital gains tax increases and abolition of tax free threshold on gains on the sale of shares.
September?s report by the Attali Commission on Economic Growth set up by France?s president Nicolas Sarkozy recommends that the government cuts tax breaks available in France by ?25 billion over the next three years.
UK and Switzerland agree to start negotiations on taxing the interest earned by Swiss bank accounts held by UK residents. Germany is in similar discussions with Switzerland. France and Italy have also showed interest.
UK announces that the annual tax-free allowance on contributions to a pension plan will be reduced from ?255,000 to ?50,000 from 6th April 2011, a move which is expected to generate ?4 billion per annum for the treasury. The lifetime allowance will be cut from ?1.8 million to ?1.5 million from 6th April 2012.
Portuguese parliament adopts an austerity budget on 26th November. It includes the abolition of numerous fiscal benefits as well as for a 2% rise in the rate of VAT from 21% to 23%, one of the higher VAT rates in the EU. For example, in France it is 19.6%, Cyprus 15%, Malta and Spain 18%.
It comes to light that the UK is in tax deal talks with three unnamed countries which could net up to ?10 billion in revenue over the next five years.
UK Treasury confirms that it is to lower the threshold at which it levies its 40% income tax rate from ?43,875 to ?42,475, bringing an estimated additional 700,000 earners into the higher tax bracket.
As governments continue to strive to improve their finances, we may see further tax increases as we move through 2011 and the clampdown on tax evasion is unlikely to cease for the foreseeable future. For peace of mind and to find out how you can legitimately lower the amount of tax you have to pay consult a professional tax and wealth management adviser like Blevins Franks.
By Bill Blevins, Managing Director, Blevins Franks
14th December 2010