In Part 1 of this article I gave a snapshot of key tax issues during the first half of 2009 ? a very taxing year. The clampdown on offshore tax intensified with many Offshore Financial Centres (OF
In Part 1 of this article I gave a snapshot of key tax issues during the first half of 2009 ? a very taxing year. The clampdown on offshore tax intensified with many Offshore Financial Centres (OFCs) agreeing to the Organisation for Economic Co-Operation and Development?s (OECD) tax standard on exchange of information. Governments were focused on replenishing depleted coffers due to the economic downturn and looked to recouping unpaid tax and increasing taxation to fill the gap.
There were more taxing issues to come over the second half of the year –
July ? HM Revenue & Customs (HMRC) confirms details of the UK?s New Disclosure Facility (NDO), to give those who previously failed to declare offshore earnings an opportunity to bring their affairs in order and avoid the high penalties they would face when eventually caught. The NDO will run from September 2009 to March 2010. Those making a complete and accurate disclosure will qualify for reduced penalties of either 10% or 20%, though they still have to pay the full tax due plus interest.
August – The UK Tax Chamber of the First-tier Tribunal orders 308 UK and overseas banks to give details to HMRC about customers who hold offshore accounts.
Swiss bank UBS agrees to hand over the names of 4,450 of its US customers to the US government.
France secures a list of 3,000 citizens holding about ?3 billion in Swiss bank accounts that authorities suspect have not been declared.
The UK signs a landmark voluntary disclosure deal with Liechtenstein which offers account holders the opportunity to settle any unpaid tax going back ten years with only a 10% penalty. The Liechtenstein Disclosure Facility is seen as more advantageous than the NDO and runs until 31st March 2015. Those who fail to make a full disclosure will have their accounts closed.
September – The UK?s NDO starts on the 1st.
Italy launches its third amnesty in eight years. It is expected to be the most profitable for the government by bringing in over ?100 billion.
The Spanish 2010 Budget contains almost ?11 billion in proposed tax increases, including proposals to increase VAT and the savings tax rate. The French Finance Bill for 2010 also contains a raft of tax initiatives to generate ?3 billion additional tax revenue for the government. In both countries the proposals need to be approved by parliament.
The OECD reports that over 90 new Tax Information Exchange Agreements and double taxation conventions have been signed since April.
October ? A US voluntary disclosure scheme is extended by three weeks to 15th October to allow more time for tax evaders and their advisers to meet the deadline.
The French government says that French banks will close all branches in jurisdictions considered to be tax havens from March 2010.
Italy?s financial police raid 76 local branches of Swiss banks in a mounting crackdown on tax evasion.
The National Institute of Economic and Social Research (NIESR) in the UK suggests that a 7% rise in the rate of personal income tax is needed for the country's debt burden to be brought to more acceptable levels.
November ? The US government announces an unprecedented response to its voluntary disclosure scheme.
Three days before the registration deadline for the UK?s NDO, HMRC announces that it is extended from 30th November to 4th January 2010 to give the 308 banks ordered in August to supply information on their offshore accounts more time to contact their customers.
December – In a clear warning to tax evaders, the UK Pre-Budget Report doubles the potential maximum penalty for offshore tax evasion to 200% of the unpaid tax. HMRC will also have to be informed of offshore bank accounts opened in certain jurisdictions. The Chancellor also increases national insurance contributions for those earning over ?20,000; freezes the personal allowance and income and inheritance tax thresholds, and extends the higher-rate tax relief restrictions to catch those earning over ?130,000.
We can expect to see further taxing times ahead.
While the global economy should improve next year, this does not mean governments will relax their stance on tax evasion. If anything, they will step up efforts to increase tax revenue as they move on to the difficult task of reducing their deficits.
OFCs, and their clients, can expect to come under further scrutiny over the coming years.
At the same time, once economies recover from the downturn, governments will be in a better position to increase taxation. Taxpayers can expect to contribute more of their earnings to help get their country?s national finances back on track.
In spite of all this, tax planning is still alive and well. But while you may want to reduce your tax bill, the solution is not to ?hide? your money from the taxman – it is only a matter of time before everyone evading tax will get caught. Why take the risk when there are tax protected investments which legitimately avoid tax without having to hide it? Seek professional advice from an experienced tax and wealth management firm like Blevins Franks to ensure your get your tax planning right.
By Bill Blevins, Managing Director, Blevins Franks
10th December 2009