No Hiding Place


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Global leaders are endorsing automatic exchange of information for tax purposes as the new global standard, and there has been a pivotal shift from bilateral to multilateral agreements.  

We have been talking about the global crackdown on tax evasion and undisclosed offshore assets for years, but this year has seen significant developments.

Global leaders are endorsing automatic exchange of information for tax purposes as the new global standard, and there has been a pivotal shift from bilateral to multilateral agreements.  

Today more data than ever before is being passed between countries, enabling tax authorities to collect unpaid tax.

This will increase when the proposed new agreements come into effect. Governments will be able to track the wealth of their taxpayers like never before.

In 2009 the global financial crisis was the catalyst for an international crackdown on banking secrecy. The Organisation for Economic Cooperation and Development’s (OECD) Global Forum on Transparency and Exchange of Information for Tax Purposes developed a standard that was quickly accepted by the G20, OECD countries, offshore financial centres and developing countries.

Within four years 119 countries had committed to the standard and around 1,100 new tax information exchange agreements had been signed.

The OECD claimed that “it is no longer possible for countries to claim that they cannot exchange bank information because of their strict bank secrecy rules”.

These are bilateral agreements, between two jurisdictions, and generally provide for exchange of information on request, rather than automatic sharing.

As the economic downturn took its toll on state coffers, governments realised they need a more effective, global approach to fight tax evasion. As a result we now have various multilateral initiatives, where several countries would automatically share information on taxpayers’ income and assets each year.

It looks like this will soon become the global standard.

Here is a summary of the key developments this year.

February/March – The Isle of Man and Channel Islands agreed to enter into an automatic exchange of information agreement with the UK.  HM Revenue & Customs offered disclosure facilities so taxpayers could disclose unpaid liabilities in advance.   

April – The G5 (UK, Spain, France, Germany and Italy) announced that they would develop and pilot a new multilateral tax information exchange agreement. The aim is to prevent tax evasion and provide a template for wider multilateral automatic exchange of information.

April – Luxembourg and Austria said that they will prepare to end banking secrecy for EU residents.  Of particular significance for Spanish residents who hold assets in Gibraltar, the European Court of Justice obliged Gibraltar to share financial information with Spain.

May – 12 EU countries, including Portugal, joined the G5 in signing a joint statement calling for the development of a single global standard for automatic exchange of information covering a wide scope of income and entities. All British Overseas Territories also agreed to sign up the G5 strategy on tax transparency.  

May – At a European Council meeting, EU Member States committed to adopting a revised Savings Tax Directive by the end of this year. This will close loopholes so that the Directive will cover all types of savings income and products generating interest or equivalent, such as investment funds, pensions, innovative financial instruments and payments made though trusts and foundations. They also agreed to negotiate as soon as possible with Switzerland, Liechtenstein, Monaco, San Marino and Andorra to ensure they apply equivalent measures.

June – The European Commission proposed the widest scope of automatic exchange of information within the EU. A new Administrative Cooperation Directive is scheduled to start in January 2015 to cover employment, directors’ fees, life insurance, pensions and property. Under the latest proposal information on dividends, capital gains and other financial income and account balances would also be shared from that date.

May/June – There were notable comments coming out of Switzerland. In May the Swiss Private Bankers Association urged the Swiss Federal Council to opt for automatic exchange of information instead of bilateral agreements with individual EU countries. A Swiss government panel report in June suggested that Switzerland should be ready to share data on foreign depositors with the EU.  

June – G8 leaders signed the Lough Erne declaration, where the first point was that “tax authorities across the world should automatically share information to fight the scourge of tax evasion”.  

September – G20 leaders announced plans to introduce automatic exchange of information as the global standard. This is a major breakthrough in the global fight against tax evasion.

This story will continue to develop until most countries are sharing information with each other. The days of financial privacy are over.

One thing has not changed however, which is that every individual has the right to structure their tax affairs in the most tax efficient manner. You should take professional advice to establish how you can use approved tax advantageous structures to reduce your tax liabilities.

27 September 2013

The 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; an individual should take personalised advice. 

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.