The standard OECD Tax Information Exchange Agreement includes this clause in Article 5:
4. Each Contracting Party shall ensure that its competent authorities for the purposes specified in Article 1 of the Agreement, have the authority to obtain and provide upon request:
a) information held by banks, other financial institutions, and any person acting in an agency or fiduciary capacity including nominees and trustees;
b) information regarding the ownership of companies, partnerships, trusts, foundations, “Anstalten” and other persons, including, within the constraints of Article 2, ownership information on all such persons in an ownership chain; in the case of trusts, information on settlors, trustees and beneficiaries; and in the case of foundations, information on founders, members of the foundation council and beneficiaries. Further, this Agreement does not create an obligation on the Contracting Parties to obtain or provide ownership information with respect to publicly traded companies or public collective investment funds or schemes unless such information can be obtained without giving rise to disproportionate difficulties.
But the UK can’t secure the data required by para (b).
It’s about time we could. Starting now.
We should be hanging our heads in shame. So should the USA — because I don’t believe this is possible in Delaware.
It’s time to get acts together. Cayman has, I am pretty sure, rumbled this. And as a result are going to get away with a DTA that is almost meaningless.
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I don’t understand this post. After all in your comments in reply to my observations on “A reply to Christian Aid” you assured me that you “could look for and almost always find out who is the beneficial owner of a UK company”.
When I point out that is not consistent with TJN’s submission to the TSC you accuse me of being deliberately misleading and “conflating” issues.
Now you return to this theme and argue that the UK cannot meet its international obligations with respect to TIEAs as it cannot secure the information with respect to paragraph 4(b).
So tell me can the UK authorties identify the beneficial owner of companies or not?
Given that the UK has brought into effect the EC directive on mutual legal assistance in tax matters and has the power to call for information from anyone in the UK under provisions of the Finance Acts plus various powers under the Tax Management Act 1970, the UK authorities have all the necessary statutory powers to meet thier international obligations.
Once again you are quite simply wrong.
As usual Barwick you choose to ignore what I said
I said that in the UK for 97% of companies (or thereabouts) of all beneficial ownership can probably be determined from the fact that people accurately record it on publicly available record
In secrecy jurisdictions that will be a tiny %
But I do accept, that in secrecy jurisdictions close on 100% of ownership could be proven if desired, and that’s not possible in the UK
You completely ignore the fact that I was arguing about two different issues
And the fact is – TMA or not, HMRC cannot prove ownership if they get no reply to a letter. Fact. It has to be proven on registration, not after the event is my point in saying what I did
I want the UK to be the best there is. It isn’t. I have presented completely clear and consistent arguments, which are right
Sorry, but please don’t waste time nit-picking
Richard
Seems the place to put the money is in ownership of publicly traded shares.
“…this Agreement does not create an obligation on the Contracting Parties to obtain or provide ownership information with respect to publicly traded companies…”
That seems to be a huge loophole.
But the UK can’t secure the data required by para (b).
It is not clear what data you are referring to.
Bill
Aren’t I agreeing with you?
Richard
I will try again.
Maybe I am being a bit slow, but I am simply not clear about which specific data it is, in sub-para b), that you say, in your original post, the UK cannot secure.
💡 It might have helped if I had used quotation marks yesterday. 💡
Bill
Let me take a simple example
I buy a UK ‘off the shelf company’ from a formation agent
They send me the forms to register the new shareholders
I may or may not complete them
I might register he company at a false or nominee address (for example, somewhere offering a postal forwarding service). I may do so in a false name
I may have (quite easily) provided a false name as a director – no one ever checks
I can still open a bank account
But HMRC will not know where to find me – or who owns the company – and their enquiries will go unanswered
After 21 months when the first accounts are due I ditch the company – maybe changing its name to another one
I then form a company with the old name and continue to use the bank account I now have with that new company – even though it was opened for another entity – I just forget to tell the bank that this is the case
Now maybe you might say I have the mind of a fraudster – but I see now way the UK can stop the above at present
There is no mechanism to do so
And no way you can probably find out who I am – except by finding the bank I use – which may be in an Eastern European country
What’s wrong in my logic?
Richard
Richard,
Nothing wrong with your logic at all, I simply was not clear what point you were making, I am now. A thing that has irked me in the past is that there is no apparent mechanism for anybody to report irregularities in a company’s affairs. There is so little checking at Companies House that fraudsters simply seem to disappear into the morass of badly filled out paperwork.
Bill
Richard, that could not happen in the Channel Islands. The authorities can always get information on beneficial ownership and there will always be a regulated entity subject to AML/CFT obligations who holds that information in the jurisdiction.
Barwick
I agree
But that’s because you’re offshore and so almost everyone has an agent
In the UK they don’t
They’re here after all
Richard
Bill
Agreed re Companies House
Their standard of checking is dire
It’s scandalous
Richard
Barwick
As you perfectly well know thousands of ‘companies’ operating in the Channel Islands are incorporated in Liberia, BVI etc with CI stooges acting as frontmen.
Unlike the UK there is no need for a foreign company that directs it affairs from the Channel Islands to register it there.
Bill
Correct me if I’m wrong, but I think a foreign company is only required to register in the UK if it conducting a trade through a branch in the UK. If a foreign company is merely a passive investment holding company and is not trading then it is not required to register in the UK.
Rupert,
That may be true, but it is not relevant to the point I am making.
There are numerous slum landlords and other low-lifes in the UK who vest their property in offshore companies with stooge CI directors / offices. The owner operates the company himself, but pretends to be merely an agent. Enforcement of judgments is extremely difficult because the property is ‘mortgaged’ to a second offshore company, quite often with the same set of CI stooges as directors. Even when it is blindingly obvious that the whole set-up is a sham and a farce it is extremely difficult to prove.
Bill,
It matters now where the company is incorporated, under the Channel Island’s respective AML/CFT laws the local administrator must identify the ultimate beneficial owner and disclose that information to the authorities on request. The strange thing is that if a BVI company is administered in say Jersey, you will be able to get more information about that company from the Jersey authorities than you would in its home jurisdiction where there may not be any information in the jurisdiction at all.
The reason for that is that unlike the UK the channel islands’ regulate corporate service providers and have necessary enforcement powers to obtain information from them about all the entities that they administer, regardless of where those entities are incorporated.
Barwick
Not quite. The reality is that the CI directors will name the person who the beneficial owner tells them to.
As for regulating corporate service providers the reality is that some very dodgy characters can set up trusts and operate them for several years before it is decided that they should not being doing so.
Bill
You are about 15 years behind the times. Cowboy operators like that got driven out years ago!
Rupert
But because of your secrecy we have no way of knowing
So we don’t believe you
Because time and again we find the assurances that you offer are wrong
Put all company details on public record
Scrap the European Union Savings Tax Directive withholding option
Then you make progress with us critics
Until then it’s clear; you work in economies dedicated to tax abuse and corruption and you have no way you can argue otherwise because it is patently obviously true
Richard
Bill,
On the first point those CI directors will go to jail, be disqualified as directors and named and shamed.
On the second point you need to demonstrate that you are fit and proper before a license is issued.
One point that I think that is missed here is that the governments of the channel islands do have in place the appropriate legislation, regulation and enforcement. It cannot be denied that there always exists those in society which break the law. That will occur in every jurisdiction and no amount of legislation or law enforcement will stop that. But if the government has legitimately put in place the appropriate framework, has proper law enforcement, exchanges information and assists other jurisdictions and takes steps to investigate and prosecute individuals then what more can a government do.
I am confident that far more criminal/drug/tax money is laundered/evaded/avoided through major jurisdictions than occurs in the crown dependencies, if for no other reason that questions of scale. How many tradesmen do jobs for cash and avoid both income tax and VAT. How many cash business (such as restaurants) underreport thier income, how many people use companies to minimise thier tax liability (or indeed time thier tax payments efficiently)? the UK government has in place the laws, regulations and enforcement powers, what more can it do?
If the authorities have in place appropriate laws (and enforce those laws) then why critisie them for the actions of a criminal minority?
Richard
That’s interesting. So what hard evidence have you uncovered in recent times then ?
[…] I’ve been asked why the UK can’t secure the data it needs to comply with the information exchange demands of Tax Information Exchange Agreements. I’ve also noted what Robert Morgenthau has had to say about abuse of US corporations. So let me take a simple example […]