George Osborne is in Berlin today to sign a new deal that will make automatic information exchange from some tax havens a reality.
As I understand it from information discussed by the Director General of EU taxation yesterday 44 countries will sign the fast track deal to commit to full automatic information exchange of data on account holdings, whether in the name of individuals or of the companies and trusts that they control or benefit from in tax havens, by 2017. Because the UK will be signing for the Overseas Territories and Crown Dependencies 52 jurisdictions may be covered and more are committed to join the process in 2018. The EU has played a role in adapting the European Union Savings Tax Directive to cover the new need and US FATCA requirements all at the same time to save admin cost.
I do, of course, warmly welcome this and have to give credit to this government for doing it, which represents a major change in heart at the Treasury. It was following a meeting at the Treasury in June 2009 during which I was basically told that automatic information exchange would not happen in my lifetime however much I lobbied for it that I wrote this paper. Now it is going to happen, and I can reasonably expect to be alive to see it. Times have changed.
But welcome as this is there remain issues of concern. Some token gestures towards developing country involvement will be made, but I am not expecting any serious progress in this direction, and that is a massive problem when so many of these countries have suffered so badly from abuse based in tax havens.
More importantly, the system will be far from comprehensive: there is a long way to go as yet before anyone can say the era of the tax haven is over. There is a great deal of uncollected money out there still and boltholes still exist for it.
Third, and as important as tax haven abuse is (and I will never say otherwise) it is a fact that tax haven abuse is a very long way from being the most important cause of tax loss to HMRC. I estimate the tax haven loss as being of much more significance than HMRC do, but still only put it at less than £5 billion out of total UK tax evasion of around £80 billion. It's right to get the £5 billion if we can, but nothing like as important as tackling the home grown abuse.
And the absurd fact is that in 2017 HMRC will be in possession of more information on the UK owned companies that UK owned banks supply services to in Jersey, Cayman and the British Virgin Islands than they will with regard to UK owned and registered companies that UK banks supply services to in Portsmouth, Newcastle, Aberdeen, Aberystwyth and Derry. That's because there is no automatic information exchange within the UK from our banks to our tax authority. As I argued in my report 'In the Shade' earlier this year, there is a pressing need for UK banks and other financial services providers (including accountants and lawyers) who have a duty in money laundering law to identify the ownership of the companies for whom they act to be required to report to HMRC and Companies House at least annually the identity of all the companies for whom they act that have bank accounts or other indications of trade, with bank account numbers being supplied. That way we could really identify all the companies that trade in the UK and who owns them and begin to take action on the real tax evasion crisis in the UK - which is happening onshore, right here in our own communities.
So I welcome new automatic information exchange rules with tax havens, of course. But I want full automatic information exchange at home too. And I want HMRC to have the staff resources to handle all this information or all this is a pointless exercise. Then I will know he is serious about tax evasion and the tax gap. Right now I am not convinced, by a very long way.