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Dashing Austria's hopes of any significant windfall from the withholding tax accord with Switzerland, the Swiss Bankers Association (SBA) has revealed that developments at international level have heavily affected revenues derived from a similar agreement between the UK and Switzerland.
In a recent release, the SBA highlighted the fact that implementation of the tax deal with the UK, is "proceeding on schedule." Under the terms of the treaty, UK clients had until the end of May to decide whether to regularize past undeclared Swiss accounts by opting to pay the one-off flat-rate withholding tax, or to disclose their assets to the UK tax authorities.
The SBA stated: "First indications from selected banks in Switzerland show that there are fewer untaxed UK assets in Switzerland than had been previously assumed. This is mainly due to the fact that many clients have resident non-domiciled status. These clients are not liable to taxation in the UK and thus do not fall under the Agreement."
The SBA added: "Furthermore, numerous UK clients have opted for voluntary disclosure, which comes as no surprise given the latest developments in Switzerland with regard to the announced adoption of a global standard for the automatic exchange of information."
The Association continued: "As a result of these two developments, less tax than expected is being transferred to the UK by means of the one-off payment. The possibility can therefore not be ruled out that either none or only a small part of the banks' guarantee payment of CHF500m (USD532m) will be recovered."
While the UK had anticipated income from the deal of between EUR4.8bn (USD6.3bn) and EUR8bn, Austria had forecast revenue of EUR1bn from its arrangement with the Confederation. Given the SBA's announcement, even this meagre figure now seems extremely unrealistic. The withholding tax accord already appears to have very much been overtaken by events.
Commenting, the Austrian Finance Ministry maintained that the actual revenue figure from the treaty is not as yet known. The Ministry did, however, concede that taxpayers have opted in their droves to file voluntary declarations, rather than pay the withholding tax charge.
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