British tax authorities are using a CD of data stolen from a Geneva branch of bank HSBC to track down taxpayers who have hidden money in Switzerland.
From 2013, the so-called “Rubik” deal – judged “fully compliant” with European Union law on Tuesday by the bloc’s taxation commissioner – should forbid such operations, but the accord is open to interpretation.
The CD landed in the hands of the British tax authorities in June 2010. It contains “6,000 names, all ripe for investigation”, according to Dave Hartnett, the Permanent Secretary for Tax at HM Revenue and Customs (HMRC). He was quoted in a report on tax evasion published in March by a British parliamentary commission.
The information, which concerns British citizens who own a bank account at the Geneva branch of HSBC, was handed to London by French authorities who obtained it from a former bank employee.
This was a godsend for the British, who were looking to recover tax on undeclared assets kept by their citizens in offshore locations.
“We wrote to about 1,000 account holders in December 2010 and most – 90 per cent – replied. We will write the next batch of approximately 1,000 letters by this summer,” HMRC spokesman Patrick O’Brien told swissinfo.ch.
Everyone on the CD will have been contacted “within six to nine months”, Hartnett said, adding that the tax authorities aimed to speed up the process further.
“The letters issued by HMRC provide specific account data including account number, name etc. and invite the recipient to respond within 35 days indicating whether they are tax compliant or wish to make a disclosure to regularise their taxation affairs for the past,” O’Brien said.
If they choose not to cooperate, “HMRC will consider whether a criminal investigation is appropriate or may charge penalties in certain circumstances of up to 200 per cent in addition to the possibility of publishing their identity”.
No fishing
In parallel, HMRC has launched around 750 civil and criminal procedures against the most serious cases named on the CD.
These are people who “are known to us as they have committed an offence before or because we consider them to be high-risk cases”, said Mike Eland, head of enforcement and compliance at HMRC, in the parliamentary report.
London will in any case have to hurry up and finish the dossier, because the Rubik tax deal agreed between Switzerland and Britain in October 2011 (then in a revised form in March) is set to enter into force in January 2013 and bans this type of operation.
In its place, it foresees a mechanism allowing the British authorities to lodge up to 500 requests for information a year with the Swiss authorities. But these must include the name of a British taxpayer suspected of tax evasion and be based on “plausible facts”, according to the text of the deal. Fishing expeditions are not permitted.
“Further letters will be sent before the agreement with Switzerland comes into force,” O’Brien said.
Vagueness
Nevertheless, a certain vagueness exists around the ban contained in Rubik.
The Swiss have interpreted it restrictively. “The deal authorises neither the purchase nor the use of stolen data to identify British taxpayers,” said Mario Tuor, spokesman at the state secretariat for international financial matters.
The British on the other hand have a wider understanding of Rubik. “HMRC has a responsibility to use whatever intelligence we receive to tackle the crime of tax evasion. This does not mean we are actively looking for whistleblowers, but we would consider intelligence from such a source if made available to us,” O’Brien said.
“The quantity and quality of intelligence in relation to offshore tax evasion is constantly improving.”
As stated in the parliamentary report, HMRC says it “reserves the right to pursue people who engage in tax evasion on a large scale”.
In 2010, the Treasury granted HMRC £596 million (SFr870 million) to track down British citizens trying to dodge the tax man. Some of this money will go towards 100 specialist investigators tasked with sniffing out assets placed in offshore centres.
Not explicitly forbidden
Rubik in effect prevents the “active” pursuit of stolen data on clients of Swiss banks but does not explicitly forbid its use, especially if it has not been obtained in exchange for payment, according to a Swiss source familiar with the dossier who wished to remain anonymous.
“If the British find a CD in their letterbox without having solicited it, nothing prevents them from using it,” said the source.
In the case of the data stolen from HSBC, the information was graciously provided by France, without any demands from London, by means of a double tax agreement between the two countries.
The Rubik accord with Austria signed on April 13 is the third of its kind with a member state of the European Union.
Agreements, with slightly different terms, were also signed with the British and the German governments in March and April.
They are scheduled to come into effect at the beginning of January 2013.
However, the accords are subject to approval by the parliaments of all countries.
Deals with other EU member countries are planned despite pressure from Brussels to introduce an automatic exchange of banking data.
However, non-EU member Switzerland wants to maintain its banking secrecy rules.
On April 17, the EU taxation commissioner confirmed the Rubik accords with Germany and Britain did not breach EU laws.