Save content
Have you found this content useful? Use the button above to save it to your profile.

UK tax amnesties not packing a punch

28th May 2010
Save content
Have you found this content useful? Use the button above to save it to your profile.

UK authorities are not doing enough to make tax amnesties attractive to those hoarding wealth offshore, according to new research.

With many countries, including the UK, seeking to bring wealth back from offshore and into the national tax regimes, it's vital to put in place tax amnesty's that will encourage such movement. That's the conclusion of a major new study by research firm Datamonitor.
There are five factors that will determine an amnesty’s success according to Datamonitor's findings:

  •  Structural changes in the home market
  • The attractiveness of the terms of the amnesty
  • Frequency of announced amnesties in the country.
  • Enforcement powers/threat of non-compliance
  • How well publicised the enforcement measures are

There are examples of how these requirements have worked successfully in some countries, said Michele Gorman, financial services analyst at Datamonitor.“Generally, if investors do not believe that an amnesty is a one-time opportunity, they will be less likely to be tempted by it. Italy announced three amnesties in eight years, which should have meant a low response to the current one; however, the terms were so attractive that they proved irresistible,” she argued. 
“The terms included: a very low 5% tax on the assets declared, with anonymity; the ability to keep the money abroad if in the European Economic Space; and fiscal and criminal immunity. Also encouraging the success of this amnesty was the threat of enforcement: tax police carried out raids on more than 75 Swiss banks in Italy and used cameras at the Swiss border to try to catch Italians bringing money into the country. These tactics, and the significant publicity they garnered, helped spur Italians to declare their offshore funds.”
In stark contrast, the UK authorities have failed to 'sugar the pill' enough to encourage similar success. “The UK’s initiative, which required full disclosure of all undeclared assets, payment of outstanding taxes, interest and penalties, plus a further 10% penalty, was a much less attractive deal,” said Gorman. “In addition, there was little publicity about the consequences of non-compliance. In fact, it is believed that more than 200 banks did not even warn their clients that their details could be handed to HMRC. The success of the Italian amnesty and the relative failure of the UK’s serves to prove that in tax amnesties, both the carrot and the stick are necessary.”
If the new UK government takes lessons from the Italian experience and makes a more attractive offer to offshore clients, there is also a danger that certain nearshore tax havens will suffer as a result with banks in Jersey, Guernsey and the Isle of Man most at risk of losing business.
“As a legacy of the strength of the UK banking sector, nearly 70% of the Channel Islands/Isle of Man offshore client base is domiciled in Western Europe with over half from the UK alone,” said Gorman. “Whilst this has been a strength in the past, an increasing focus from governments to get this money back onshore means these banks are at risk of losing a significant amount of business to a successful UK tax amnesty.”

Replies (1)

Please login or register to join the discussion.

By J Lessels
11th Jun 2010 13:23

Free rides for crims

How about....

If you don't fess up when the amnesty is on the table you go to Wormwood Scrubs for a long time if you are later caught. Is that sugary enough?


Thanks (0)