The UK government is getting even tougher on tax fraud. Prime Minister David Cameron has made “fighting the scourge of tax evasion” a key priority of the UK’s presidency of the G8 group of countries this year…
The UK government is getting even tougher on tax fraud. Prime Minister David Cameron has made “fighting the scourge of tax evasion” a key priority of the UK’s presidency of the G8 group of countries this year. He is pushing for multilateral tax information exchange agreements, and summoned leaders of the UK’s offshore centres to London to get them to commit to improving tax transparency.
HM Revenue & Customs (HMRC) has also stated its intention to toughen its stance against tax evasion. It released a report called “No Safe Havens: Our Offshore Evasion Strategy 2013 and Beyond” in March, which was published alongside the Budget. It warned that the dramatic increase in information flows means that tax evaders are even more likely to be caught and suffer the strongest penalties.
In April the UK signed an agreement with the other G5 countries, Spain, France, Germany and Italy, to develop and pilot a multilateral information exchange. So far 12 other EU Member States have said they will sign up. A wide range of financial information will be automatically exchanged, which will help catch and deter tax evaders as well as provide a template for wider multilateral automatic tax information exchange.
They called on the EU to take lead in promoting a global system of automatic information exchange.
Before Mr Cameron faced the world stage on this issue at the June G8 Summit, he had to get his own house in order. He called on the Crown Dependencies of Isle of Man, Jersey and Guernsey and Overseas Territories of Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat and Turks and Caicos Islands to sign up to new agreements to exchange of financial information.
The islands are widely regarded at ‘tax havens’, though they strongly dispute the term.
In May the Prime Minister wrote to the offshore islands, calling on them to continue to work in partnership with the UK in taking the lead on two critical issues: tax information exchange and beneficial ownership of companies. He told them:
“I respect your right to be lower tax jurisdictions. I believe passionately in lower taxes as a vital driver of growth and prosperity for all. But lower taxes are only sustainable if what is owed is actually paid – and if the rules to achieve this are set and enforced fairly to create a level playing field right across the world. There is no point in dealing with tax evasion in one country if the problem is simply displaced to another.”
He summoned leaders of each island to attend a meeting in London the weekend before the G8 Summit. Business representatives also attended.
At the meeting, all Britain’s offshore centres committed to tackling tax evasion. They agreed to sign the Organisation for Economic Cooperation and Development (OECD)’s multilateral convention on mutual tax assistance, where financial and tax information will be shared between countries.
They also agreed to publish action plans on beneficial ownership, to provide details of the true owners of so-called “shell companies”.
In a joint statement, the leaders of the territories and dependencies said: “We are committed to continuing to play a leading role in delivering a responsible and effectively regulated global business environment and in tackling the global problem of tax evasion.”
The Chief Ministers of the Channel Islands also released a joint statement confirming their view that “tackling tax evasion and fraud if a global responsibility in which we will continue to play our full part”.
The UK’s offshore islands have already made significant steps to improve tax transparency.
The Channel Islands and Isle of Man have signed up to the US Foreign Account Tax Compliance Act (FATCA), which provides for automatic exchange of information, and have agreed to enact similar arrangements with the UK.
The Offshore Territories have offered to sign up to the G5 scheme, both bilaterally with the UK and on a multilateral basis with the other European countries signed up. Chancellor George Osborne said that this “represents a significant step forward in tackling illicit finance and sets the global standard in the fight against tax evasion”.
Under automatic exchange of information, local authorities will receive information on their taxpayers who have foreign based bank accounts and other financial instruments.
Information will include names, addresses, account numbers, account balances and details of payments, gross interest, dividends and other income generated within the account.
There is nothing wrong with having offshore bank accounts and investments; indeed they can be very useful for British expatriates. However when you have cross border financial interests taxation can get very complicated. You need to be sure that you are fulfilling your tax obligations in your country of residence, and that your assets are set up to be as tax efficient as they legitimately can be.
You should never hide assets and income from the taxman, even if withholding tax is deducted at source.
Speak to Blevins Franks who are experts in at Spanish, French, Portuguese, Cyprus and UK tax issues and establishing the most tax efficient ways of holding your assets.
18 June 2013