It is reported that:
All EU Member States should agree to exchange full information on interest earned on saving accounts by July 2014, says MEPs in a report adopted on Friday (25m April). Members also called for an end to tax havens.
In approving by 351 votes in favour, 27 against and 20 abstentions, the report by Benoit HAMON (PES, FR), the EP called for the end of the withholding tax option for certain Member States and asked the Council to take action to put an end to so-called tax havens. The aim of the draft legislation under consideration is to improve action against tax fraud.
Under current EU legislation, Belgium, Austria and Luxembourg benefit from a transitional period during which they are not required to automatically exchange information on tax matters and can instead apply a withholding tax to savings accounts of non-residents as an alternative. The approved report calls for an end of this transitional period at the latest by July 2014.
Moreover, Members agreed to call on the Community to "take appropriate action" to improve transparency of so-called tax havens. This would mean, for jurisdictions large and small, including the Monaco, Andorra and Liechtenstein, Switzerland and the US, agreeing to apply the OECD standards in the field of transparency and exchange of information on tax matters.
According to the rapporteur, tax fraud in the European Union amounts to more than EUR 200 billion a year, which represents more than 2% of its GDP.
As is usual with taxation issues, Parliament's views are advisory rather than binding and the final decision is for the Council, acting unanimously.
Excellent news.
The vote was so clear: the message is emphatic, the withholding option has to go.
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If the EU really wants to make headway with tackling tax heavens then they should start with what they can change, which is company law and EU adopted accounting standards:
-Ban shares designated as warrant to bearer. Why should anyone have the right to have limited liability AND anonymity – there is no commercial need for this and its a disgrace that the UK allows companies to be set up in this manner.
-Amend the EU adopted version of IAS24 (related parties) so that nominee shareholder arrangements must disclose the beneficial owner of a company or have their accounts judged not true and fair and given an adverse audit opinion. That would give HMRC a nice signpost that something is fishy.
OECD treaties etc and high level agreements are all very good, but we need to up the tax take NOW. And company law and accounting standards changes might not be very interesting or eye-catching, but they are a start.
Tom
Absolutely agreed
Tax haven reform begins at home
Add to the above:
a) beneficial ownership on public record
b) no nominee directors – or full disclosure of who they work for
c) full accounts on public record – but simplified, historic cost accounting allowed
d) A national register of trusts where they must be registered or be legally unenforceable (and yes, that is possible and would work)
e) country by country reporting…..
and on and on
Let’s do it!
Richard
Richard
So how would your suggestion deal with this scenario ?
“Dear HMRC
I am resident and domiciled in England. I have exercised my right to establish a family estate planning trust under the laws of New Zealand. The sole trustee of the trust is XYZ corporate trustee in Singapore. Please find attached a copy of the trust deed. I settled £5m on the trust and please find attached a cheque for £1m, being the 20% rate for a lifetime gift to a trust.
The trust owns 100% of a Hong Kong company called Z Limited which will own a £5m investment portfolio managed in Singapore. The directors of Z Limited are three professional fiduciaries, Mr. A in Singapore, Mr B in Hong Kong and Mr C in Dubai. I have absolutely no role in the management and control of the trust or the company and therefore the structure is resident outside of the UK. I will furnish you with the annual accounts of the trust and of the company so that you can assess my resulting personal liability to UK tax.
My rationale for forming the structure is because I value my personal financial privacy but I have no desire to publicise my wealth at UK Companies House or on any UK register of trusts. However, I am fully committed to meeting my UK tax reporting obligations.
Yours faithfully
J Smith”
100% tax compliant, 100% compliant with the law. Absolutely nothing wrong with any of it and very easy to retain the basic right to privacy.
Rupert
An utterly bizarre example
The settlor may remain liable for tax on the trust income
He could retain privacy by having it all in his name
Richard
Richard
Not “utterly bizarre” at all.
Of course the settlor may well remain liable for tax on the trust income (depending on who the beneficiaries are) but he isn’t doing this for tax planning reasons and has disclosed everything to HMRC. He is perfectly happy to pay the resulting tax on that trust income and the structure provides no tax planning advantages.
He wants to use a trust to achieve family estate planning and wealth succession objectives and until now he would have used an onshore Uk trust. However, he simply doesn’t want details of his family wealth to appear on public record because of a UK trust register which you are proposing and which doesn’t currently exist.
If he holds those assets in his own name then he is not able to use the estate planning benefits of a trust to control the timing of succession of his wealth after his death. A tax-compliant trust is a perfectly legal way of meeting those objectives.
Or are you really trying to say that the use of tax-compliant foreign trusts for tax-transparent estate planning is immoral and illegal ? If so then I think you must also be advocating global exchange controls which makes it impossible to transfer assets abroad. There is more chance of Gordon Brown winning the next election than there is of global exchange controls coming in.
Believe me – there are many wealthy families from all over the world who undertake variations of such planning, including people from the Middle East who have no domestic taxes to be concerned about, but also individuals and families from high tax countries who trust the domestic tax authorities with that information but don’t wish the media and other parties to know of the extent and nature of their wealth by publicly disclosing that information in their home country.
The right to privacy for such fully tax-compliant individuals is one which you simply fail to acknowledge as being necessary, but is one for which the demand very clearly exists. I’d be fascinated to know how you would seek to outlaw it, and if you don’t believe that there are people who require such privacy then of course you don’t need to outlaw it at all. But don’t kid yourself that such people would get caught by domestic trust registers. They have options and of course they would take them.
Rupert
Why not require those who use such structures to register them – and if UK resident to require foreign ones to be registered too – just as foreign companies have to be registered in the UK?
There is, after all, no obligation to use them
It’s the price of privilege.
Richard
Richard
What would be the purpose of registering such a trust ? I don’t understand. HMRC need to know and would indeed know. Nobody else has any possible need to know as its none of their business whether somebody uses a trust or relies on a will for their estate planning. Do the media or the next door neighbour have any right or possible interest in knowing that somebody has settled assets on a trust to plan the succession of their family wealth ? Its surely no more relevant than being required to display copies on your latest bank account on a notice board outside your house.
Foreign companies only need to register in the UK if they are carrying out a business from a branch in the UK. That’s entirely logical.
You’ve lost me completely on the “price of privilege” for daring to use a trust as a tax-transparent succession estate planning tool.
I can see entirely where you are coming from if the individual was planning to create a trust and not tell HMRC about it, but if he is committed to being tax-transparent that factor isn’t present.
Richard
I am keen to read your comments to my above post as its a very relevant question arising from your suggested register of trusts.