The Treasury issued this press release not long ago:
New UK multilateral action to combat tax evasion
The Government has today agreed with France, Germany, Italy and Spain to develop and pilot multilateral tax information exchange. Under the agreement, a wide range of financial information will be automatically exchanged between the five countries. This will help catch and deter tax evaders as well as provide a template for wider multilateral automatic tax information exchange.
This pilot will be based on the Model Intergovernmental Agreement to Improve International Tax Compliance and to Implement FATCA developed between these countries and the US (which also formed the basis of the subsequent UK-US bilateral automatic exchange agreement). This will help ensure that international tax evasion is tackled in a way that minimises costs for both businesses and governments. A joint letter has today been issued to the European Commission setting out the terms of the agreement.
Exchequer Secretary to the Treasury, David Gauke said:
“This is an important further step in the fight against tax evasion and represents the next stage in promoting a new standard in the automatic exchange of tax information. This builds on the agreements we have reached with the Isle of Man, Guernsey and Jersey and the discussions currently underway with the Overseas Territories.”
The Prime Minister has set out how he wishes to use the UK's presidency of the G8 to explore options for greater levels of tax information exchange, particularly on a multilateral basis. The Government therefore sees this agreement as an important early step in a much wider move towards a new international standard in the automatic exchange of tax information, providing a step change in the ability of tax administrations to clamp down on tax evasion.
I'm pleased, of course.
The question "why has it taken to long to convince them?" lingers.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
Mr Murphy,
I do not understand why this is made into an important development. These five nations were already exchanging information automatically under the existing ESTD with respect to interest income, and are about to start exchanging information about 5 other income categories in 2014 under the MFA directive.
On a separate note, this initiative overlaps with several areas of existing and future European legislation, and thus should . If you remember well, this is the argument that the EU Commission had seized on to challenge the legality ( eventually unsuccessfully) the bilateral UK-Swiss agreement that came into force in January 2013.
It will be interesting to see if the Commission has similar objections to this agreement, which on its face represents a breach of EU competence.
It is interesting because, as you on the right always fail to appreciate because nuance is beyond your comprehension, it represents a move to trialling a system designed o be extended
And that is a major development
Mr Murphy
It is far from obvious how the EU FATCA could be expanded.
As I have been pointing out in another post, the US FATCA relies on the USA’ unique economic leverage, a result of the dominant size of its economy, the US Dollar’s status as the world currency, the depth and sophistication of its capital markets, etc. Simply said, no nation or financial institution can rationally afford to be cut off from the US financial markets (as demonstrated by Iran). Even so, the US are struggling to bring on board China and Russia.
The five EU nations that are parties to the EU FATCA have no economic leverage whatsoever, with their economies in accelerated decline under unsustainable debt loads. Neither the Euro nor Sterling are major world reserve or transaction currencies and in any event, since they do not control the ECB system (which they a share with another 13 central banks) they cannot impose withholding taxes on all Euro payments.
An expansion of the EU FATCA would only work if the USA agreed to join it or if it was merged into the US FATCA itslef. This is perfectly possible, but probably not desirable from a European perspective.
Rubio.. Wow, you fell off the wagon with that answer.. (eventually unsuccessfully???) Ha. The CH-UK agreement was successfully neutered by the EU Commissioner and interest was carved out, leaving Rubik to the vagaries of all future amendments. So as the EUSD expands its scope into capital gains, all that will be left of Rubik is a empty hollow shell.
Mr Morris
I believe the Commission’s objective was to strike the agreement down entirely, on the basis that in some areas it overlapped and conflicted with EU-level legislation. The main point of contention was that, with respect to interest income specifically, the withholding tax charged in Switzerland constituted a full discharge of the taxpayer’s obligation, whereas the EU-level legislation foresaw that the withholding tax was only made on account of future payments in the context of the submission of regular tax filings.
The UK and Switzerland did away with the objections by simply adding a protocol to the agreement, and passing domestic legislation that the EU could not object to. If in the future the scope of the EU-Switzerland agreement are expanded in line with the EUSD itself to include capital gains (which incidentally Switzerland would have to agree to), the protocol and the domestic legislation related to it will come to apply to any withholding tax levied in Switzerland.
Mr Morris
There are some signs that the Merkel/Schaeuble administration in Germany is taking a much more aggressive attitude towards Switzerland. it appears to be willing to deal with tax issues at a more pan-European intergovernmental level (though not through the Commission) rather than through the informal meetings of German-speaking governments, as was historically the case. This may be electoral posturing ahead of the September elections. However, even if Merkel/Schaeuble win the election as is widely anticipated, they are unlikely to reverse course.
Germany is the only country in Europe with any genuine leverage over Switzerland. If the change of strategy is confirmed, I cannot see how Switzerland will be able to resist demands from Germany for automatic exchange of information. It will be interesting however to see whether Switzerland enters a bilateral agreement with Germany alone, or makes concessions to the EU as a whole.
Rubio
EU Member States will demand Automatic Exchange of Information from any other member state signing FATCA, without looking at the minutae of whether it’s an IGA or depends on the recalcitrant customer agreeing. These are now winds of change. Austria’s fighting like a lion to maintain banking secrecy will last a month. Once the entire EU is AEI, pressure on CH will ratchet up to unprecedented levels.
Yet you keep insisting CH will be able to resist this pressure as if it were an island?
Mr Morris
The ‘G5’ EU Member States can demand AEI, but it is unclear whether they can obtain it, especially since they lack the ability to wield the credible threat of a 30% withholding tax. In any event, isn’t this a little academic since it now appears that all EU Member States will switch to AEI?
I definitely do not believe that Switzerland can resist long term changes. I have actually written a lengthy post to say exactly the opposite. Switzerland has already caved in to pressure from the USA. If Germany asks for the same treatment, Switzerland will have no choice but to agree to it. The EU, institutionally or through the Commission, is a non-factor in this matter.
The most likely scenario going forward is that Switzerland will enter selected IGA2-type agreements with selected member states, starting with Germany, and possibly France and Italy depending on what concessions it gets in return from these two countries.
It is not clear all members will as yet switch to AIE under the revised European Union Savings Tax Directive
But that’s not relevant
You’re looking, like all right-wingers do, for legal solutions
These things do not work like that
The zeitgeist moves these situations and you have no sense for that
Mr Murphy
May I suggest that you were the one looking for a legal solution, by invoking the most favored nation clause on the MFA directive. I was only demonstrating to you, conclusively, that this clause does not apply in a legal sense.
I have expressed several time the opinion that the political, not legal, fallout of US FATCA would lead to serious changes in the way European nations deal with cross-border tax enforcement issues.
And as has been shown, you are wrong
This debate ends