The Malta Independent 6 December 2021, Monday

More countries, including Malta, sign up to automatic tax information exchange pilot

Malta Independent Thursday, 5 December 2013, 08:57 Last update: about 8 years ago

Luxembourg, Liechtenstein, Columbia, Greece, Ireland and Malta have become the latest signatories to the G5's automatic exchange of tax information pilot, bringing the total number of countries involved to 37, the UK Government announced last week.

The states agreed to automatically share information about bank accounts held by taxpayers in their jurisdiction, but resident in another participating state, following a meeting of the Global Forum on Tax Transparency in Jakarta the previous week.

Details of the signatures emerged as the UK concluded the signing of tax agreements with Bermuda, the British Virgin Islands, Gibraltar, Montserrat and the Turks and Caicos Islands; meaning that most of the Crown Dependencies and British Overseas Territories with major financial centres now have information-sharing arrangements in place. The CDs and BOTs have also agreed to be part of the G5 multilateral information sharing pilot.

British Chancellor of the Exchequer George Osborne said that international financial centres were beginning to recognise that their success in the future would depend on how open they were about individuals and companies from overseas that held assets in the region.

"This government has been leading the way in pushing for greater tax transparency and information sharing, putting it at the heart of our G8 agenda – the commitments made today demonstrate the considerable and rapid progress that has been made," he said.

"Tax information sharing will provide HMRC with vital information in the fight against evasion as we continue to clamp down on individuals seeking to hide their assets offshore. We have also made significant investment in HMRC's anti-avoidance and evasion work to ensure that people pay the tax they owe," he said.

The multilateral automatic information exchange pilot was announced in April by the G5 largest European economies of France, Germany, Italy, Spain and the UK. The agreement is based on the five countries' model agreement to implement the Foreign Account Tax Compliance Act with the US, which was published in July 2012.

FATCA is designed to prevent tax evasion by US citizens using offshore banking facilities, and introduces reporting requirements for foreign financial institutions with respect to accounts held by US residents.

The agreements between the UK and the CDs and BOTs are based on a modified version of this agreement, commonly known as 'UK FATCA'. UK FATCA requires FFIs in certain territories to provide information to their national tax authority about accounts held overseas by UK residents. This information will then be provided to HMRC under exchange of information agreements.

The UK announced in May that all BOTs and CDs with significant financial centres had committed to the introduction of information-sharing arrangements. Only Anguilla has not yet finalised its arrangements. Agreements with most of the BOTs will not be reciprocal, meaning that information will only flow from the BOT to the UK. The agreements with the CDs, and with Gibraltar, allow for a two-way exchange of information.

The agreements will take effect from 30 September, 2016.

Meanwhile, Luxembourg, Cyprus, the British Virgin Islands and the Seychelles do not meet the international standards on tax transparency, according to a report by the Organisation for Economic CoOperation and Development published last week.

The OECD rated 50 countries and jurisdictions on their tax transparency after calling for greater international cooperation against tax evasion.

Luxembourg, Cyprus, the British Virgin Islands and the Seychelles were listed as "non-compliant," while Austria and Turkey were rated "partially compliant."

Non-compliant territories failed to share taxpayer information with other countries effectively, or did not gather information on corporations registered on their territory, according to the OECD's ratings.

The UK and the US were listed as "largely compliant" – but came in behind countries including Canada, China, France, India and Japan, which were ranked "compliant."

Following a meeting of the OECD's transparency forum in Jakarta, Indonesia, the country's finance minister, Muhammad Chatib Basri said: "At a time where most economies are extremely fragile, having so many jurisdictions working together and agreeing on very sensitive outcomes to improve international tax cooperation is key and extremely positive. I have no doubt that this is the kick-off to a new era in the global tax environment."

The OECD has focused on tax evasion and avoidance by both companies and countries in recent times.

Last month, the organisation published letters it had received from European companies including Diageo and Gazprom, and groups representing US multinationals, asking it to reconsider proposed measures to tackle tax avoidance, arguing the plans could hit trade and investment.

British Prime Minister David Cameron also announced last month that he would make public a new database of company ownership details designed to expose tax evasion schemes.

The OECD forum, called the Global Forum on Transparency and Exchange of Information for Tax Purposes, agreed to create a new Automatic Exchange of Information Group in an effort to move towards the adoption of AEOI.

In a response to Reuters, the British Virgin Islands' Financial Secretary, Neil Smith, said that the OECD's rating did not reflect the practices of his country since 2012. "Unfortunately this classification misses the mark," he said. "It does not give an accurate reflection of the standards of tax information sharing found in the BVI.''

A statement from Luxembourg's Ministry of Finance said the country "considers this rating to be excessively harsh, particularly in view of the Global Forum's previous observations with regard to the legal and regulatory framework put in place by Luxembourg," it said. "Based around this legal and regulatory framework, Luxembourg has made a commitment to exchange information effectively and has extensive experience when it comes to exchanging information for tax purposes."

Representatives from both the Seychelles and Cyprus were not immediately available for comment when contacted.

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