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France Snubs Swiss Tax 'Deal'

September 2011 - Tax & Private Client. Legal Developments by Hassans.

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France has, for the time being at least, reportedly ruled out the idea of concluding a bilateral tax deal with Switzerland, aimed at resolving the ongoing issue of tax evasion, following recent advances from and talks with the Confederation.

Despite its urgent quest for additional revenues to consolidate public deficit reduction, which includes recourse to increased taxation of the country?s wealthiest, the French finance and budget ministries are said to have dismissed such an agreement, even though a deal would undoubtedly serve to yield much-needed tax revenues.

Undeclared assets held by French taxpayers in Swiss accounts have been estimated at around CHF90bn (USD114bn).

Rather than follow the German lead, France reportedly plans to uphold its principles, by continuing to actively combat tax fraud and tax evasion. Failure to do so would be to contradict the policy adopted by the government over the past few years, the ministries insist, emphasizing that the priority is transparency.

Determined to track down and to sanction alleged tax evaders, the French government is still calling for an automatic exchange of tax information between countries, a solution that has already been adopted by the European Union, and which is expected to enter into force in 2013, despite continuing opposition from Luxembourg. The EU aims to extend this provision to third countries such as Switzerland.

Switzerland and Germany initialled their agreement on August 10, designed to end a long-standing dispute on the taxation of German capital income held in Swiss accounts. Maintaining traditional banking secrecy, the agreement will allow German residents to retrospectively legitimize their existing banking relationships in Switzerland either by making a one-off tax payment or by disclosing their accounts. A final withholding tax will be levied on any future investment income and capital gains received by German bank clients in Switzerland, with the proceeds transferred to German authorities.

The UK now looks certain to join Germany in securing a lucrative tax deal with Switzerland, with both Swiss and British authorities claiming a deal is imminent. Patrick Odier, head of the Swiss Bankers Association, said that an agreement is on the cards. He said, "I have no doubt that we will strike a deal with Britain very soon". Odier added, "I hope that the conclusion comes in the coming weeks".

Echoing Odier?s comments UK Chancellor George Osborne recently revealed that as part of the government's crackdown on tax evasion, he is seeking a tax deal with the Swiss authorities, to prevent the type of tax avoidance previously seen there.

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