Switzerland, UK agree to end dispute over tax evasion

Switzerland and the UK have agreed to put an end to a dispute over tax evasion by wealthy Britons holding offshore accounts with Swiss private banks.

The finance ministries of UK and Switzerland said yesterday that Swiss banks would pay 500 million Swiss francs ($629 million) to the UK government to cover the failure by their clients to disclose undeclared money in the past. The banks would then be reimbursed the sum out of taxes paid by their customers.

''The days when it was easy to stash the profits of tax evasion in Switzerland are over,'' UK chancellor of the exchequer George Osborne said in an e-mailed statement. ''We will be as tough on the richest who evade tax as on those who cheat on benefits.''

The development follows a March 2009 agreement over meeting international standards to avoid being blacklisted as a tax haven by the Organisation for Economic Cooperation and Development. The settlement would lead to outflows by Britons who question the value of cross-border accounts with Swiss banking secrecy no longer impregnable and comes after a similar agreement with Germany earlier this month.

The accord ''respects the protection of bank clients' privacy, but also ensures the implementation of legitimate tax claims,'' the Swiss finance ministry said in an e-mailed statement from the capital, Bern.

Swiss banks would charge a withholding tax of 48 per cent on investment income and 27 per cent on capital gains earned by Britons holding offshore accounts, the two governments said. Revenue generated would go to the British Treasury, however, client identities would not be revealed.