2009 August » Tax Research UK

If we can cooperate on information exchange for VAT why not on direct taxes?

Europe, OECD, TIEA, VAT Comments Off

Aug 202009

In the framework of its strategy to combat tax evasion and fraud ( IP/06/697 ), today the European Commission adopted a proposal for a recast of the Regulation on administrative cooperation in the field of valued added tax, extending and reinforcing the legal framework for the exchange of information and cooperation between tax authorities. One of the key elements of the proposal is the creation of a legal base to set up Eurofisc: a common operational structure allowing Member States to take rapid action in the fight against cross border VAT fraud. The Commission today also adopted a report on the functioning of the administrative cooperation.

L?°szl?? Kov?°cs, Commissioner for Taxation and Customs, said: "In the current economic situation it is more important than ever to fight tax fraud efficiently and a fully functioning administrative cooperation between tax administrations is key in that respect. My objective is to ensure that tax authorities have all technical and legal means to take action against European Union wide VAT fraud and to ensure that each tax administration is prepared to protect other Member States’ tax revenue as effectively as their own."

Eurofisc. [ will be]an operational structure where Member States will in practice, fight fraud together. It should allow a very fast exchange of targeted information between all Member States as well as the setting up of common risk and strategic analysis. This will enable Member States to react timely to stop fraud and catch fraudsters, making it more difficult for new fraud schemes to emerge and spread around the Community

The proposal changes the approach of the protection of VAT revenues. In addition to giving Member States tools to cooperate more closely and to exchange information faster, the Recast regulation sets out that Member States are jointly responsible for the protection of VAT revenues in all Member States.

This is great news. It is so obviously the right direction of travel. But if “in the current economic situation it is more important than ever to fight tax fraud efficiently and a fully functioning administrative cooperation between tax administrations is key in that respect” is true of VAT why is it not true for direct taxes such as income tax and corporation tax? And why isn’t the OECD taking this approach across the world instead of promoting Tax Information Exchange Agreements?

The EU is, as has often been the case, three steps ahead of the OECD here. I just hope the OECD catches up very, very soon. They need to.

Let them starve

Conservatives 15 Responses »

Aug 202009

The Guardian reports:

A US academic billed as David Cameron’s new intellectual guru takes a Darwinian approach to economics and says it is wrong for the rich to pay higher taxes to help the less well-off.

Nassim Nicholas Taleb, a professor of risk engineering at New York University, attacked Barack Obama for increasing his tax bill as part of a series of anti-recessionary measures [during] ‚Ä¶an appearance with Cameron at the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) on Tuesday.

In some of his most provocative remarks at his appearance with Cameron, the Lebanese-American academic criticised Obama for increasing his taxes as he harked back to Darwin’s theory of evolution.

"I happen to do OK. I am paying more taxes," Taleb said. "How can you have evolution if those who do the right thing have to finance those who did the wrong thing? If you are making money in 2009 – that means you have a robust business in the cycle – you are paying more taxes. If you are losing money in 2009 you get a bigger tax break. It is the opposite of everything I believe in."

Worryingly:

Cameron praised Taleb and said his book had confirmed his own prejudices.

As worryingly, Cameron made clear he disagrees with Taleb on climate change, but not on tax.

So what do we infer? I suggest, first Taleb equates financial prosperity with fitness to survive i.e. wealth = talent, moral well being, good genes, etc. I find this notion utterly repulsive. I have also found not one iota of evidence to support it. It is pure accident of birth that most do, or do not have wealth. that accident of birth is locational e.g. if you are born in the UK you will almost always be richer than if born in Angola. This also utterly ignores the fact that many now wealthy got to that position entirely because of the creation of the post war welfare state.

Second I think we must infer he wishes the poor to be very, very poor – so that survival is in doubt. I presume he means that within and between countries. I call that callus indifference to the plight of humanity.

And Cameron seems to share it.

The signal is clear: he wants to cut benefits, he wants to increase the wealth gap in society, and he doesn’t care about the consequences for a great many in our society.

Vantis: accountants who can’t agree accounts

Accountancy Comments Off

Aug 202009

FT.com / Companies / Financial Services – Dispute with E&Y forces Vantis delay.

I’ve written about Vantis before, and their tax planning schemes.

Now they can’t agree their own accounts with their auditors.

It doesn’t look good, does it?

More Banks in Europe Identified in US Tax Probe

Switzerland, Tax evasion Comments Off

Aug 192009

More Banks in Europe Identified in Tax Probe – WSJ.com.

Wealthy U.S. citizens using a tax-evasion amnesty program have identified nearly 10 Swiss and European banks where their accounts are held, opening new fronts in the Internal Revenue Service’s probe into potential tax crimes, according to people familiar with the situation.

Among the banks named in the voluntary disclosures are Swiss banks Credit Suisse Group AG, Julius Baer Holding AG, Z?ºrcher Kantonalbank and Union Bancaire Priv?©e, known as UBP.

The disclosures don’t signal wrongdoing at the banks. It may mean that a U.S. citizen simply kept money at a European bank and now wants to report it. Nor does it signal that other banks mirrored UBS AG in the way the Zurich bank and its private bankers used subterfuge to meet with and communicate with clients for whom the bank created complex structures to evade taxes.

The dam has burst. We don’t know that these banks assisted clients to abuse, like UBS, but the evidence is mounting they were used for abuse.

It’s time the US sought ways to use bank licence regulation in the USto say to banks operating there ‘open up or get out’ as it looks likely the UK is doing.

That will put the cat amongst the pigeons.

UBS and US deal

Banking, Switzerland, Tax evasion 2 Responses »

Aug 192009

UBS has issued a press release on its deal with the US saying that the:

‚Ä¢ Agreement does not call for any payment
‚Ä¢ Parties will promptly file a stipulation with the court dismissing the enforcement action relating to the John Doe summons
‚Ä¢ IRS will submit request for administrative assistance pursuant to the existing US-Switzerland Double Taxation Treaty
‚Ä¢ US and Swiss governments expect that approximately 4,450 accounts will be provided to the Swiss Federal Tax Administration in response to this treaty request
‚Ä¢ UBS will send notices to affected US persons encouraging them to participate in the IRS’s voluntary disclosure practice
‚Ä¢ Agreement also resolves all issues relating to the alleged breaches by UBS of the Qualified Intermediary Agreement

The Department of Justice has said:

The Justice Department and the Internal Revenue Service (IRS) today announced that the agreement with the Swiss government has been finalized. As a result of the agreement, the United States will receive substantially all of the accounts of interest when it initiated the John Doe summons against UBS on June 30, 2008.

Under the agreement, the IRS will submit a treaty request to the Swiss government describing the specific accounts for which it is requesting information. The Swiss government will then direct UBS to initiate procedures to turn over information on thousands of accounts to the IRS. The IRS will receive information on accounts of various amounts and types, including bank-only accounts, custody accounts in which securities or other investment assets were held and offshore company nominee accounts through which an individual indirectly held beneficial ownership in the accounts.

Also, the agreement retains the U.S. Government’s right, if the results are significantly lower than expected and other measures fail, to seek appropriate judicial remedies, including resuming actions to enforce the John Doe summons.

The agreement involves a number of simultaneous legal actions:

The judicial enforcement of the John Doe summons will be dismissed. While this enforcement motion will be withdrawn, the underlying John Doe summons remains in effect.

Upon receiving the treaty request, the Swiss government will direct UBS to notify account holders that their information is included in the IRS treaty request. It is expected that these notices will be sent on a rolling basis with some being sent over the coming weeks and others over the coming months. Receipt of this notice will not by itself preclude the account holder from coming into the IRS under the Voluntary Disclosure Program, which is due to end on Sept. 23, 2009.

In addition, the Swiss Government has agreed to review and process additional requests for information from other banks regarding their account holders to the extent that such a request is based on a pattern of facts and circumstances equivalent to those of the UBS case.

Information provided to the IRS through this process will be thoroughly examined for all potential civil and criminal tax violations. The IRS will assess any additional tax, interest and a number of applicable penalties. This includes the penalty for the wilful failure to file a Report of Foreign Bank and Financial Accounts (FBAR). This penalty can be up to 50 percent of the value of the account for each year an FBAR was not filed. Under the Voluntary Disclosure Program, the account holders must pay 20% of the amount of tax that was underpaid for the past six years and 20% of the highest value of the account over the past six years, in addition to all their unpaid taxes and interest due on those taxes.

The IRS will also recommend criminal prosecution in those cases where the facts warrant such an action. To date, the Justice Department and the IRS have successfully prosecuted four U.S. customers of UBS whose information was provided to the IRS by the Swiss bank as part of the Deferred Prosecution Agreement.

Individuals whose information is obtained by the IRS through this process will, by longstanding policy, not be eligible for the voluntary disclosure program.

The UBS statement makes it sound as if the matter has been amicably resolved.

The DoJ has mentioned the fine print which includes some comforting detail, including the right to resume and an extension to other banks.

According to the BBC the 4,450 accounts included assets of at least $18 billion, although it’s not clear if that sum is all there now. I would expect a significant part of that sum to end up in the hands of the IRS.

More than that, I’d expect many more than that number will actually come forward, and not just UBS customers either. As the IRS are clearly evidencing, their confidence is high, their willingness to proceed as high and it would take a fool to ignore that.

Mind you, you had to be pretty foolish to use these arrangements in the first place. But at least the odds have changed now.

Avoiding 50% tax: Cheap loans and EBTs

Tax avoidance 7 Responses »

Aug 192009

Avoiding 50% tax: Cheap loans and EBTs.

When AccountingWEB is openly promoting tax abuse its time for serious preventative measures.

1) Disallow all payments to emplyee benefit trusts for corproation tax

2) Charge all payments to EBTs to PAYE when paid assuming employee’s NIC and highest marginal rate of income tax apply.

That’s my suggestion.

Problem solved.

Who’s blogging? ¬´ Grumpy Accountant

Accountancy, Blogging 1 Response »

Aug 192009

Who’s blogging? ¬´ Grumpy Accountant.

Another new accountancy blog from the left side of the tracks!

Keep them coming

The Somalia Offshore Banking Scam Exposed

Corruption, Liechtenstein Comments Off

Aug 192009

PRIVACY ORIENTED | From the age of BIG BROTHER – greetings! ¬ª Blog Archive ¬ª The Somalia Offshore Banking Scam Exposed [UPDATED 3].

For all I know the exposure is also a fraud

But its good reading

What’s amazing was the address for the Somali finance centre was in …..Liechtenstein

Obvious, isn’t it?

Cameron: naive or just stupid on debt?

Conservatives, Economics 6 Responses »

Aug 192009

The Telegraph reports:

Mr Cameron said Labour’s plan to borrow an extra £700 billion over five years and take the national debt to £1.4 trillion was a “disgrace” that exposes the UK to serious economic risks.

Governments borrow by selling bonds – a form of IOU note – to investors, who then receive interest payments on the loan.

The Treasury forecasts that paying the interest on the national debt will cost taxpayers £42.9 billion in 2010/11, more than the annual budget of the Ministry of Defence. Grant Thornton, an accountancy firm, estimates that by 2013, debt interest will cost £58 billion.

Let’s be clear: UK GDP was £1,446 billion in 2008 according to the Office for National Statistics. That’s £1.4 trillion, or thereabouts.

So now let’s face some facts. First, as a nation we’re going to borrow one times our income. Hardly an excessive gearing level. Many states have done so before now.

Second fact: there has to date been no problem in selling UK debt, and nor is there indication that there will be so. In fact, what I’m being told in regular discussions with those in the bond market is that there is a shortage of debt to invest in right now. This will be so for some time to come. Baby boomers are retiring. Their private pension funds will be shifting out of equities into bonds: demand for debt is going to be high for some time to come. And the interest paid on the debt is not going to waste, it’s pensioner’s income. Cameron’s one sided thinking ignores this.

Third point: this debt has to be repaid over periods of up to 30 years. Over that time at least half will be written off by inflation even if it runs at only 3%. The rest when due for repayment will be rolled over without problem. It always has been. There is no compulsion at all to repay debt now and to do so would be as mad as a householder taking out a thirty year mortgage and then starving themselves and their family whilst almost freezing to death and refusing all forms of entertainment to repay the loan in five years. We’d think that a householder who did that was mad: Cameron would be the same to do it to the country.

Fourth: we can afford it. Sure government income is down now, but it’s still £496 billion this year. The interest we pay is just £28bn a year now. And yes, of course it will rise as the amount of debt increases. But the real issue is this. If we don’t spend now government income won’t rise – and it is a shortage of income, not an excess of spending that is our problem at present. Reflate the economy and our income will rise. In 2008 the expectation was of income of £575 bn. If reflating creates extra government income in due course of about £80 billion a year isn’t it worth paying £20 billion or so in interest to achieve this?

But before people jump too high, I stress, I’m not asking us to go back to where we were before: we all know there were faults in where we were. And I’m also not saying its right to borrow at all times: it is not. Debt should be incurred cyclically. But the reality is that unless we spend now the depth of the recession into which we will fall will be enormous, and we’ll have a massively bigger problem than having to pay £50 odd billion a year in interest (much of which – as I note – will become the income of UK pensioners – and what’s the issue with that?). Without spending government income will collapse, state support for the 4 million or more Cameron’s plans will put out of work will be cut to a point where desperate poverty will be the norm for many, and the capacity of the economy to pull out of the recession will have been destroyed in much the same way that Thatcher destroyed our manufacturing.

So, what does this say about Cameron? First that he does not understand what he’s talking about.

Second that as prime minister in waiting he has threatened to default on our debt – which can only increase the cost of our borrowing as lenders will not expect him to repay – which therefore means he’s just made the problem a lot worse.

Third, he has effectively confirmed that he does want to cut spending and throw us into deep recession and create at least 4 million unemployed as I have predicted – although that will not cut debt at all – as I have also predicted.

And fourth it shows how incredibly naive he is as a politician.

Now do you see why I am worried?

And he’ll create this mayhem all because he thinks we can’t pay £50bn in interest – just 3.45% of our national income. How mad is that?