Historic Liechtenstein tax deal branded 'unfair'

UK residents holding bank accounts in Liechtenstein will have their details shared with the British government to make sure they have paid the right tax, in a groundbreaking deal signed today.

The new tax information exchange agreement will enable the UK and Liechtenstein to swap information to ensure the right tax is paid in each country.

A tax disclosure programme will allow penalties on unpaid tax to be capped at 10% of tax evaded over the last ten years, providing the taxpayer is fully open with the taxman.

PKF broadly welcomed the new tax amnesty but warned the difference in terms to the New Disclosure Opportunity were 'unfair'.

'The Liechtenstein tax deal offers account holders the opportunity to settle any unpaid tax with only a 10% penalty and going back only as far as 10 years. In contrast, the NDO set to begin in September this year, is asking UK taxpayers with investments in other offshore jurisdictions to declare unpaid tax as far back as 20 years. In some cases they may also have to pay a 20% rather than a 10% penalty.

John Cassidy, tax investigations partner at PKF, said: 'It is wholly unfair that there are different rules for those with investments in Liechtenstein and those with investments in other offshore jurisdictions.'

Christian Aid, the charity organisation also slammed the taxman after estimating developing countries lose at least $160bn (£97.1bn) a year to 'tax dodging' by multinational companies alone.

‘The fact that the UK has signed two agreements today – a TIEA and a second one, ensuring that uncooperative UK taxpayers have their Liechtenstein accounts shut down – is a clear sign that TIEAs are almost impossible to use,’ said Christian Aid policy manager Alex Cobham.

‘They are extraordinarily bureaucratic and riddled with get-out clauses,' Cobham claimed in a statement. 'If TIEAs were an effective way for tax authorities to combat tax dodging, then there would have been no need for the second agreement.'

HMRC has vowed that those who fail to make full disclosures will have their Liechtenstein accounts closed down.

'Those who have been evading UK tax on assets held in Liechtenstein banks must now settle with us. There are no alternatives,' HMRC permanent secretary for tax Dave Hartnett said.

The Liechtenstein Disclosure Facility runs from 1 September 2009 to 31 March 2015.

Further reading:

Tax amnesty branded 'unfair playing field'

HMRC plans separate Liechtenstein amnesty

Liechtenstein eases bank secrecy rules