International Tax Crackdown Continues To Gain Force


Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

The Organisation for Economic Co-operation and Development?s (OECD) released its latest report Promoting Transparency and Exchange of Information for Tax Purposes on 27th May. It reveals t

The Organisation for Economic Co-operation and Development?s (OECD) released its latest report Promoting Transparency and Exchange of Information for Tax Purposes on 27th May. It reveals that since the G20 summit on 2nd April 2009 when world leaders vowed to crackdown on tax evasion, more than 400 agreements have been signed by jurisdictions which were identified by the OECD on that date as not substantially implementing the internationally agreed tax standard. Since then, 28 jurisdictions have been removed from that category after having signed at least 12 tax information exchange agreements (TIEAs) and are continuing to negotiate and sign more.

Until the G20 summit in Washington on 15th November 2008 44 TIEAs had been signed. The 23 agreements agreed in 2008 were double the total number signed since the Global Forum began in 2000. Following the summit in Washington and in the run-up to the April 2009 summit in London TIEA signings skyrocketed, as did the negotiation of new double tax conventions (DTCs) or protocols to existing DTCs that incorporated the standard on exchange. A further 21 TIEAs/DTCs were agreed in just four months, and between the London summit and the G20 summit in Pittsburgh in September, 164 more agreements were in place. The pace continued and by the end of the year a total of 36 jurisdictions working to substantially implement the standard had signed 200 TIEAs and upgraded 118 DTCs.

The OECD?s Progress Report on 27th May 2010 shows that 72 jurisdictions have substantially implemented the internationally agreed tax standard, and nine ?tax havens? with five ?other financial centres? have committed to the standard which requires exchange of tax information on request.

Caribbean jurisdictions

Dominica, Grenada and Saint Lucia are the latest Caribbean islands to upgrade to the OECD?s category of jurisdictions to have substantially implemented the tax standard. Director of the OECD?s Centre for Tax Policy and Administration, Jeffrey Owens, said:

?We continue to see a great deal of progress in the Caribbean as jurisdictions move to sign agreements. With Dominica, Grenada and Saint Lucia now reaching this benchmark, most of the Caribbean jurisdictions have implemented their commitment to signing exchange of information agreements.

?We will be working with the remaining Caribbean jurisdictions ? Belize, Costa Rica, Guatemala, Montserrat and Panama ? to encourage them to follow this trend, providing them with whatever assistance is needed.?

OECD and EU strengthen tax co-operation and open it up to developing countries

The OECD and Council of Europe have developed a Protocol amending the multilateral Convention on Mutual Administrative Assistance in Tax Matters to bring it in line with the international standard on exchange of information for tax purposes and to open it up to countries that are neither members of the OECD nor of the Council of Europe.

This follows calls at the April 2009 G20 initiative for action ?to make it easier for developing countries to secure the benefits of the new co-operative tax environment, including a multilateral approach for the exchange of information.?

The amending protocol provides that bank secrecy and a domestic tax interest requirement should not prevent a country from exchanging information for tax purposes. It goes beyond exchange of information on request and provides for other forms of assistance including spontaneous exchanges of information; simultaneous examinations; performance of tax examinations abroad and assistance in the recovery of tax claims.

Italy obtains stolen data

Italian financial police, the Guardia di Finanza, have obtained an estimated 7,000 names of suspected tax evaders from the data stolen in 2008 by Herve Falciani, a former employer of private bank HSBC Holdings in Geneva. Italy requested the information from France which was provided with 3,000 names from the same source last year and which the French tax authorities are investigating for tax evasion. The details of the Italian account holders refer to accounts held in Switzerland in 2005 and 2006 totalling US$6.9 billion.

Switzerland again asked for tax information

The Metropolitan Magistrate of Mumbai has issued letters rogatory (a request for judicial assistance from a foreign country) to Switzerland in the alleged tax evasion case of stud farm owner Hassan Ali Khan who is reported to be holding $8 billion in Swiss banks. The Swiss Federal Tax Administration had earlier refused to provide information to the Indian authorities because it went against Switzerland?s banking secrecy laws.

The letters rogatory will help the Indian tax authorities to request information on Khan?s Swiss bank accounts. Khan is under investigation for evading tax amounting to approximately a fifth of the annual revenue received by the Indian government.

US whistleblower activity heightens

Since the US whistleblower program increased its reward the number of informants providing information on suspected tax evaders has soared. Previously the Internal Revenue Service promised rewards of between 1% and 15% but a guarantee of a minimum reward of 15% and a maximum of 30% for proven cases of tax evasion over US$2 million is bringing in between 40 and 50 leads per month on potential tax evaders. A surge in tip-offs came at the beginning of 2008 with the law?s implementation when there were ?significant numbers? of reports involving more than US$100 million. Could other countries start to take a similar approach?

Greek tax evaders named and shamed

Greek doctors accused of evading tax are to be named and shamed by the finance ministry. The list numbers 57 doctors who along with lawyers and other similar professionals fail to issue receipts and under declare their income. Fines amounting to several hundred thousand of Euros have been imposed on eleven of the more serious offenders.

The finance ministry has threatened to confiscate the contents of bank accounts owned by tax offenders and by seizing these accounts it believes that it can rake in about 10% of Greece?s national debt.

With other Southern European countries facing similar economic problems, in our opinion it is possible they will also take similar hard stances against tax evaders.

The global financial crisis spurred the ongoing crackdown on tax evasion which is seen as the source of much needed revenue for countries in deficit. In order to avoid paying more tax than is necessary there are legitimate arrangements available, depending on your country of residence, which can help to lower your tax liabilities. A tax and wealth management specialist like Blevins Franks can advise you of the opportunities suited to your individual circumstances.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.