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Personal Tax Data At Risk Under TIEAs

Thursday, August 5, 2010

A new report by the Society of Trust and Estate Practitioners (STEP) has highlighted a "worrying lack of basic measures to protect taxpayers from abuse" when governments exchange tax data under Tax and Information Exchange Agreements (TIEAs).

STEP notes that there are already well over 300 tax information exchange agreements (TIEAs) in place between countries and the number is growing rapidly. The report warns of the increasing risk that, as the TIEA network grows, countries with poor human rights records and weak data security will gain access to detailed personal financial data on individuals.

The report concludes that a lack of strong data protection provisions in OECD standard TIEAs could leave law abiding taxpayers and their families vulnerable to issues such as threats from criminal gangs who have gained access to tax data.

David Harvey, STEP Chief Executive, said: “Most TIEAs so far have been agreed between major economies, such as the UK, and other well run countries. There is now strong political pressure to expand the list of countries accessing tax data via TIEAs, bringing in countries where it is harder to be confident that personal tax data will be secure. It is very worrying, therefore, that so far there are no clear plans to ensure minimum standards are in place to protect the public.

Harvey added: "It seems extraordinary, for example, that the current OECD review process for TIEAs only looks at a country’s performance in providing tax data. There is no check whatsoever to ensure countries receiving data on taxpayers’ financial affairs protect that data and respect personal confidentiality.”

As an example of how things might go wrong when detailed personal information is shared with other governments, the report highlights a recent court case in the UK where the Zimbabwean authorities seized USD300m of assets after they became aware that the UK was making anti-money laundering checks on a large - but legitimate - transaction for someone based in Zimbabwe.

STEP has proposed a set of minimum standards that countries must meet before getting access to tax data from other countries, including minimum standards of good governance, basic data protection measures and a right of redress for taxpayers if things go wrong. STEP also recommends that:

  • Only countries meeting agreed minimum standards on objective measures of quality of national governance (such as those provided by the World Bank data) should be permitted to have access to personal data on individuals from other jurisdictions;
  • Clear mechanisms should be put in place to ensure that only ‘relevant and necessary data’ are exchanged;
  • Requests for data should be assessed by a public judicial authority, in line with the current EU legal framework for data protection;
  • Clear measures should be put in place to ensure that the legitimate rights of individuals are made explicit and effectively enforceable if data exchanged under TIEAs is abused;
  • Independent oversight and supervision mechanisms for TIEAs should be put in place with regular public reporting.

While the report notes that relatively few TIEAs have been signed with countries with poor governance records, practitioners and savers have expressed concern that "political expediency could change the current largely tacit policy of sharing information only with trusted partners."

States the report: "As the pressure to widen the OECD framework grows it is likely that large, powerful economies with poor governance records will begin to demand access to current tax information sharing arrangements. In the absence of explicit protections, real politik on the part of the major democracies may result in them getting such access."

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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