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Data-sharing deal helps governments track tax evaders

Thursday, 30 October 2014   (0 Comments)
Posted by: Author: Agency Staff
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Author: Agency Staff (BDlive)

More  than 80 countries signed an agreement in Berlin on Wednesday that could end banking secrecy in the global battle against tax evasion and fraud, even though critics say it has shortcomings.

Among the signatories were European Union (EU) countries and former staunch proponents of banking secrecy such as Liechtenstein and tax havens the Cayman Islands. The deal — the Multilateral Competent Authority Agreement — crowned two days of talks by the Global Forum on Transparency and Exchange of Information for Tax Purposes, hosted by German Finance Minister Wolfgang Schaeuble.

Fifty-one countries signed one agreement for an automatic exchange of information beginning in September 2017.

The agreement designates the national authority in each country which will be responsible for collating the data and transferring it to the other countries. The aim is for every country to be kept fully informed about the offshore holdings of its citizens.

Around 30 other countries — including Austria and Switzerland, the Bahamas and the United Arab Emirates — pledged to join the agreement from 2018.

"Banking secrecy, in its old form, is obsolete," Mr Schaeuble told the Bild daily newspaper.

The forum was set up under the auspices of the Organisation for Economic Co-operation and Development (OECD) in Paris, which estimates that "offshore tax evasion is a serious problem for jurisdictions all over the world". Economist Gabriel Zucman, a specialist in fiscal fraud, has calculated that about €5.8-trillion is stashed away in tax havens, depriving authorities of around €130bn in revenue each year.

The international movement to end banking secrecy has gained new momentum recently with the US’s enactment of its 2010 Foreign Account Tax Compliance Act. The act obliges foreign banks to report to the Internal Revenue Service on US clients’ offshore holdings in excess of €50,000. The move prompted five European countries — the UK, France, Germany, Italy and Spain — to call for an automatic exchange of information in 2011. After months of talks, amid resistance from countries such as Luxembourg and Austria, the EU came up with an accord two weeks ago.

"The more countries sign up, the more difficult it will be for others to attract investment," said OECD director for tax policy and administration, Pascal Saint-Amans. However, he said a number of financial centres remained a "source of concern".

Mr Saint-Amans said the OECD will compile a list of countries that do not automatically exchange information, a measure which could act as a disincentive for investment funds and international organisations.

But fiscal fraud experts such as the Tax Justice Network’s Andres Knobel believe such a "blacklist" will be a feeble deterrent.

He pointed out that the US act retains 30% of banks’ revenues in the country if they do not disclose the information.

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