The revelations today in the Guardian, as well as in Le Monde, BBC Panorama and the US International Consortium of Investigative Journalists, are truly staggering. It shows how a HSBC-owned private bank in Switzerland actively colluded with hyper-rich clients to enable them to avoid EU taxes, to conceal undeclared ‘black’ accounts from their domestic tax authorities, to help them withdraw bricks of cash in foreign currencies so as to launder huge sums of money from tax havens for use in their own countries without paying tax (used most notoriously by the British clothing tycoon and restaurateur Richard Caring to withdraw 5 million Swiss francs, equal to £2.25m, from his Geneva bank on one day in 2005), and to provide accounts for international criminals and corrupt businessmen. HSBC have defended themselves by saying they have now improved their standards of due diligence, but the truth is that this massive outburst of tax fiddling, a microcosm of the global tax cheating, would still be continuing today but for the whistleblowing by an IT worker at the bank who hacked into the Swiss bank’s 30,000 accounts and fled with them to France.
There are several profoundly serious lessons to be drawn from this episode. First, the level of regulatory accountability exercised by the banks was pathetic to non-existent. HSBC understood all too well what was being done, but found it too profitable to put a stop to it. They excused themselves by the patent hypocrisy that payment of tax was a matter for their individual clients, not for them, even though they themselves were the architects of all manner of artificial devices to ensure tax wasn’t paid. In future a Labour government should make back collusion in tax avoidance a criminal offence.
Second, the mantra is perpetually used by tax dodgers caught out that they had paid all taxes due and had not broken any laws. It is true that the tax laws need to be significantly tightened to block obvious loopholes. At present all ordinary employees – some 99% of the population – are obliged to fill in a tax return each year detailing their earnings. If they give false information, understate their true income, or conceal sources of their earnings, they can be prosecuted and if found guilty, heavily fined or even sent to prison.
Much more so there should be a legal requirement for wealth-holders to provide a return each year of their assets, their location (anywhere in the world), and the individual and total value of all their assets. There should then be an annual levy on these assets in accordance with a progressive tax scale. Failure to provide accurate and complete information of their wealth each year should lead to fines commensurate with the extent of concealed wealth and in the most serious or repeated cases a custodial sentence. For the first time the British tax system would then take on a real element of equity between rich and poor.