The Treasury issued the following remarkably breathy press release last night:
Chancellor George Osborne today (Thursday 14 April) unveiled a ground-breaking international deal to automatically share information on the ultimate owners of companies with key EU allies, making it more difficult for firms to dodge tax or funnel corrupt funds.
Britain has initiated an agreement with Germany, France, Italy and Spain that will see tax and law enforcement agencies from the five countries exchange data on company beneficial ownership registers and new registers of trusts, allowing for more effective investigation of financial wrongdoing.
The Chancellor has also written to G20 counterparts, along with Finance Ministers from Germany, France, Italy and Spain, urging progress towards a fully global exchange of beneficial ownership information in order to remove ‘the veil of secrecy under which criminals operate'.
A global move towards interlinking country registries will provide, for the first time, international real-time access to tax and law enforcement agencies on company ownership.
According to the Guardian Osborne has called this a hammer blow to tax abusers.
Let me be blunt: it really would be good if the Treasury sometimes told the truth.
First, let me welcome the idea behind the movemove, the main advantage of which is in bringing Germany on board. Fears based on its history in the 1930s have long held Germany back from embracing beneficial ownership data. That they have accepted the need to now do so now is welcome.
Now let me list the nonsense. And after that the problems.
First, given that the press trailed a German / French initiative on this on Wednesday the chance that this is UK led is very remote.
Second, the UK seems a reluctant partner, apparently doing all it can to mitigate disclosure on trusts, where new rules are far from adequate and will mean that effective information exchange from the UK is very unlikely.
Third, this comes at the end of a week when media I have seen suggests that Jersey, Guernsey and Cayman (at least) are cock-a-hoop at having rebuffed calls from David Cameron that they must have readily accessible registers of beneficial ownership even for the use of UK law enforcement agencies, so how the UK thinks that now is the time to claim world leadership in this issue is very hard to credit. As I have argued, this government has proved this week to be a good friend if the forces of corruption.
Fourth, to suggest that the UK's new register of beneficial ownership will provide any new or useful information to exchange on beneficial ownership is ludicrous. This is where the problems start. The new UK register is in fact a bit like an honesty box arrangement for those committing tax crime.
There will, of course, be a requirement that companies disclose details on beneficial ownership. But there will be no way of checking if the disclosure they make is accurate.
And no extra resources for pursuing those who might not be compliant seem likely to be provided to Companies House.
Worse, we know that around 400,000 companies do not file annual returns each year as required copy law and that Companies House make no effort to recover this data. They do instead simply dissolve the companies in question, or 'strike them off' in their jargon. This is the ultimate reward for the fraudster: their crime is covered up for them after they have been trading for some time without any demand being made for accounts or ownership data, let alone tax due.
I estimate this costs the UK at least £11 billion a year and it may be more.
The government refuses to accept any such estimate.
The result is a fraudster's paradise here in the UK where we will in future only have data on beneficial ownership from already legally compliant companies when it is data on the fraudster's that we need.
The late Michael Meacher MP proposed law in 2013 to address this, which I wrote for him. The law would have required banks to supply the information they must legally hold on the beneficial ownership of companies they supply services to to Companies House and HMRC so that the best available data on beneficial ownership that has been verified is on line for law enforcement (and public) purposes. There is almost no cost: the banks have this data and they must have it by company number and so filing it would be easy. No data would imply a genuinely dormant company. Foreign banks could be required to provide this data through their UK branches.
But there is no such move now so the UK is offering to exchange wholly inadequate data that in far too many cases it will not have under this new agreement.
That makes this announcement almost fraudulent in itself. Going into an agreement you know you cannot fulfil for short term political gain is profoundly unacceptable, but that is exactly what is being done by the UK government.
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Do not understand why the external auditors do not have a public assurance responsibility to report on beneficial interests and for this to form part of the published account.
And Radio 4 this morning introduces this, its first news item, with the line, ‘Tax campaigners have welcomed…’ and the only criticism referred to is the unliklihood of countries such as Russia and Saudia Arabia falling into line.
But I sure waded in
Radio 2 news at 9:00am reported you as welcoming this as a first step, Richard, though they did at least have the decency to follow with an audio clip where you described it as “hollow”.
Bizarre
I welcome the principle and slam the delivery and they notice the first point instead of the second
Richard
Good to hear you on Radio4 and keep up the good fight.
Thanks
Good appearance on Today earlier, sounded like even Humphrys was in agreement with your points.
Thanks
And then we have to add to this the news that our beloved government, in the shape of that disciple of Ayn Rand, Sajid Javid, is pushing ahead with the privatisation of the Land Registry, thus making access to the information held on ownership of property and land a commercial transaction (for which the fees will be high) and removing the organisation from FoI requirements.
As this government has shown time and time again, every policy they announce on transparency, accountability and related issues is first and foremost an exercise in PR, and very little, if anything, more.
Staggering, isn’t it
There is a 38 degrees petition against the Land Registry privatisation, which is clearly against the public interest and well worth supporting the petition.
https://you.38degrees.org.uk/petitions/stop-privatisation-of-the-land-registry
Keith, seen and signed it, but thanks. Worth adding that Private Eye notes that in the consultation that took place when the idea of the Land Registry being privatised was floated by the previous government 90% of those who responded were against. Apparently only big business was for it. No surprise there, then.
Keith, likewise signed that petition. Wasn’t able to sign as an overseas Brit so used my mother’s postcode in London.
Glad to see Ivan picking up the point about the privatised Land Registry falling outside the scope of the Freedom of Information Act, a point I have raised more than once, but with reference to the hundreds of State built and maintained schools, handed over, lock stock and barrel – buildings AND land AND Title Deeds, handed over free, gratis and for nothing by that odious charlatan, Gove (now, with postively Swiftian irony, our Minister of JUSTICE!! and so surely the guardian of the law – as if!!) to totally unaccountable, and in some cases downright crooked and dangerous, Academy chains, with the DfE being UNABLE to say to whom these schools were given AS THEY HAVE NO RECORD, meaning our ONLY source of information on their true ownership is the soon to be privatised Land Registry, where such information will be deemed “commercially sensitive”!!!
Clearly, on Day 1 of any Labour Government, an Order in Council must be issued to say that, WHATEVER might appear on the face of any school Title Deed, EVERY school maintained by the State in May 2010 shall be deemed to be owned by the State, and let the alleged owners come crawling out of the woodwork to prove any right of ownership by way of purchase price and consideration advanced. Like as not it will turn out that THEY owe US, and can be charged accordingly.
I believe that would be appropriate
You can imagine the outcry
The solutuion is simple. Tax rentier class assets. Currency on it’s own shrinks. Currency in businesses is a risk. Renting out Land, Property, Infrastructure is prety much a guaranteed income, unless you live in a war zone or an area of crime, arson etc. Maintaining a safe secure country in which these properties have value costs money in the form of an educated populous, who have the time not to look after their grandparents and a realistic hope of success within society.
The fairest way to tax property is not by the market value of the property, not the income of someone who may not be liable to UK taxes.
We can set varying rates ranging from 100% on the proportion of the ownership that is for the benefit of an unknown for paying interest to an unknown to 0% for self owned UK tax payer primary residence with uk tax paying creditors up to a multiple of local average value / primary resident who is a child or uk tax payer.
Kaz – that last paragraph is a very clear and concise explanation of what should be done. Thanks for posting.
The “common reporting standard” is the ultimate transparency legislation, already the banks will be sending beneficial owners, signatories and other details like average and maximum balances for 91 countries to the tax authorities of people’s residence, your suggestion of banks informing tax authorities is similar but the CRS goes way beyond what you suggest, and don’t I hope you like it when you bank charges you 1000 to have an account.
But there are massibge holes in CRS
Especially domestically
So I am sorry but you miuss the point
Just think of all the fee income earned by the Big 4 assisting clients comply with CRS (even with the holes). Then there’s FATCA, beneficial owner rules, BEPs, country by country reporting, tax controversy from tax evasion cases etc etc etc. Their businesses must be booming. One day – at this rate – accountants will inherit the world.