UK-Swiss Tax Deal Falls £2.3bn Short of George Osborne Promise

Britain is failing to rake in as much money as Chancellor George Osborne had promised from taxpayers who are sheltering their money in Switzerland's secretive banking system, with a shortfall of £2.3bn.

Under the deal between the UK and Switzerland, British domiciles started to be taxed on their banking deposits in Swiss institutions.

Just £818m (€998m, $1.35bn) was collected during the whole of 2013 after the tax agreement started on 1 January, according to the Office for National Statistics (ONS). This is against a forecast in Osborne's 2012 Autumn Statement of £3.12bn being raised during the 2013/14 financial year.

When announcing the deal, Osborne said it would raise £5bn for the Treasury's coffers over the six years to the end of 2018.

"The UK-Swiss Agreement will recover significant amounts of previously unpaid UK tax and is expected to secure a total of £1.9bn over the forecast period," said a Treasury spokeswoman.

"Although, less than originally forecast the agreement has already yielded the Exchequer almost £800m in unpaid tax which would not otherwise have been received.

"The government is working closely with the Swiss authorities to ensure the agreement is being fully and properly implemented."

A report by parliament's Public Accounts Committee (PAC) in December raised doubt over the force with which HMRC was pursuing tax collection, including on Swiss banking deposits.

"In pursuing unpaid tax, HMRC has not clearly demonstrated that it is on the side of the majority of taxpayers who pay their taxes in full," said the PAC report.

"It does not use the full range of sanctions at its disposal to pursue vigorously all unpaid tax, and its measure of the tax gap does not capture all the avoided tax that it should be collecting."

HMRC hit back and said it "strongly disputes" the PAC's findings and that it worked hard to collect tax.

The PAC said HMRC's figure of £35bn for the annual tax gap – the difference between what was collected and what it thinks it should have collected had there been no evasion or avoidance – was just the "tip of the iceberg".

For years corporates and individuals have put their money in Switzerland's banking system for the sake of dodging taxation and because of the sector's notorious secrecy.