Jersey, Guernsey and the Isle of Man Sell Out

tax       2003-01-31 
British offshore tax "havens" will join a new crackdown on tax evasion, Chancellor Gordon Brown is due to confirm.

Jersey, Guernsey and the Isle of Man, will participate fully in a new system of automatic exchange of banking information between countries.

They will join a dozen EU countries also launching an information exchange scheme in a long-awaited move to tighten the net against individuals salting away cash abroad.

They do this to avoid paying tax in their own country.

Withholding tax

But, subject to a deal at talks in Brussels, the three other EU countries, Austria, Belgium and Luxembourg, will instead levy a withholding tax of 35% on foreign savings.

That way they will avoid having to open up their banking sectors to automatic information exchange.

Mr Brown originally insisted that all member states would have to operate the same system to end banking secrecy and crack down on tax dodgers.

But Switzerland - crucial to effective European action on tax evasion - has refused, warning that the cradle of banking secrecy will not swap details on its customers.

Information swap

The Swiss have, however, offered to levy the 35% "withholding tax" on the savings interest of non-residents and pass it on to the relevant tax authority.

British officials say a withholding tax of 35% will be acceptable to Mr Brown even though he has opposed that option for years.

If a deal is done it means a dozen EU countries will in future automatically swap bank information on their foreign investors.

That will enable the relevant domestic treasury to levy tax at home on savings interest accrued abroad.