G5 To Develop And Pilot Multinational Tax Info Exchange
Friday, April 12, 2013
The UK, France, Germany, Italy, and Spain have agreed to develop and pilot
a major new multilateral tax information exchange program, intended to tackle
international tax evasion in a way that minimizes costs for both businesses
The initiative is outlined in a joint letter to the European Union's (EU's)
Tax Commissioner Algirdas Šemeta, signed by the G5's finance ministers.
In it, the ministers point to the anti-evasion agendas of both the European
Union and the US as key steps forward. In December, Šemeta tabled an Action
Plan containing two recommendations designed to foster a stronger EU stance
against so-called tax havens and combat aggressive tax planning. The US's Foreign
Account Tax Compliance Act (FATCA) legislation is intended to ensure that the
Internal Revenue Service (IRS) obtains information on financial accounts held
by US taxpayers with foreign financial institutions (FFIs). The Commission supported
the G5 in discussions with the US Government on a possible intergovernmental
approach to FATCA. A model agreement was developed and published last July.
It is on this model that the pilot will be based. Once it is up and running,
a wide range of financial information will be automatically exchanged between the G5.
According to the letter, the aim of the pilot is that it "will not only
help in catching and deterring tax evaders but will also provide a template
as to the wider multilateral agreement we hope to see in due course." Other EU member states will be invited to join the scheme,
with the "hope that Europe can take a lead in promoting a global system
of automatic information exchange, removing the hiding places for those who
would seek to evade paying their taxes."
Commenting on the news, Sophie Dworetzsky, wealth planning partner at Withers, said:
"For UK taxpayers this makes good the promise set out in the Budget two
weeks ago, when HM Revenue and Customs (HMRC) promised to crack down ever harder
on offshore evasion, which it estimates costs it up to GBP4bn (USD6.1bn) a year
in lost revenues. How accurate this is is anyone's guess, but certainly taxpayers
can assume that anything other than full compliance is now no longer an option.
No doubt HMRC will also make good use of this information through their powerful
new joined up technology."
Dworetzsky did nonetheless sound a note of caution: "Let's hope that the
fully compliant are not subjected to fishing expedition type investigations
simply because they hold, for entirely legitimate reasons, accounts or other
structures outside the UK. It is important to remember that simply having money
and or trusts etc. offshore often has nothing to do with tax and everything
to do with family succession and preferable legal systems."