International Tax Transparency

International Tax Transparency

Groundbreaking attempts have been made by governments across the world to recoup more tax revenues than ever before. Tax authorities, treasury departments and the Organisation for Economic Cooperation and Development's (OECD's) global forum (with over 125 member countries) on 'Transparency and Exchange of Information for Tax Purposes' work together, to identify untaxed investments held overseas. This article, by a former Her Majesty's Revenue & Customs (HMRC) Tax Inspector, reminds readers how the UK and most of the world got to where it has in terms of tax transparency and Automatic Exchange of Tax Information (AEOI).First, the US enacted FATCA (Foreign Account Tax Compliance Act) in 2010, the first law of its kind. It effectively requires financial institutions around the world to identify whether their customers are 'US citizens' and if so, report comprehensive tax/banking information about them and their accounts to the US' Internal Revenue System (IRS), or face sanctions. For the UK, what came next is of profound importance. It entered into an Intergovernmental agreement (IGA) with the US, so that UK financial institutions may exchange the information required under FATCA legally via HMRC. The first bulk information exchanges have already occurred.FATCA inspired the UK Government to draw up AEOI IGAs with its crown dependencies in October 2013 and shortly thereafter with its overseas territories too. For individuals with unpaid UK tax liabilities relating to investments held in those jurisdictions, similarly valuable information will be shared with HMRC commencing from next year.Simultaneously, the UK collaborated with G5 countries to pilot a similar arrangement, and following the UK's G8 presidency and influence amongst G20 countries and the EU, the enlarged group attracted OECD's support. The global forum then designed the new global standard for AEOI, the Common Reporting Standard (CRS). Under the CRS, detailed tax/banking information will be provided by 'reporting financial institutions' to their local tax authorities, before being exchanged with other tax authorities where 'reportable persons' are tax resident.Reporting financial institutions will annually report:• interest/investment income• dividend income• any other income• income from certain• (cash-value) insurance contracts• proceeds on the disposal of financial/portfolio assets• annual balances/valuesFurthermore, where passive/shell entities are used to hold reportable financial accounts, CRS requirements are extended to identify 'controllable persons' effectively looking through the entities. For companies and trusts etc controlling persons include: owners/shareholders, trustees, protectors, settlors and beneficiaries.To date over 90 jurisdictions have given political commitments to adopt the CRS, with many having finalised legal frameworks already. Much to the surprise of many, long established private financial centres are also part of this international tax transparency wave, eg Switzerland, Liechtenstein, Luxembourg, Austria, Hong Kong, Singapore, Dubai/UAE, as well as Israel and India. Refer to OECD's list as of 23 July 2015, of all jurisdictions.So when does all this valuable tax/ banking information begin to be exchanged with the UK There are many reasons why people hold accounts and investments outside of the UK, eg: greater returns on capital or privacy, family wealth, temporary residence etc. Grant Thornton will not assist anyone looking to continue to conceal untaxed funds, but we are able to offer support and professional advice to those looking to regularise their historic tax affairs.

This could be in cases where individuals may have made unfortunate mistakes, left problems unresolved over a length of time or are simply correcting past failures. We will help individuals to unlock their potential by being in a better position to utilise their accumulated wealth. There is no time like the present for individuals to seek independent advice and a free tax health-check to ensure their income producing assets are UK tax compliant.

Amit Puri is Senior Manager of Tax Investigations at Grant Thornton.

Related Stories

No stories found.

Podcast

No stories found.

Defence bulletin

No stories found.

The power of the quad

No stories found.

Videos

No stories found.

Women Leaders

No stories found.
India Global Business
www.indiaglobalbusiness.com