In the news this week: The clamp down on tax evasion!
Do you have overseas financial holdings, either as an individual or within a corporate structure? If so then the news the global tax regime is destined for big changes may concern you.
A report by the OECD, prepared for the G8 summit in Northern Ireland, says clamping down on illegal tax evasion, requires the automatic sharing of tax data. The OECD favours the implementation of new laws. By coincidence, or rather probably not, the call from the OECD comes as the G8 prepares a declaration on tax evasion.
Recently a number of multi nationals working within the current tax regime have paid little or no tax in some of their overseas territories. Companies use a number of different structures to achieve this. The new declaration would prevent companies moving profits from the location where they are made and prevent individuals from hiding money offshore.
The OECD says “vast” amounts of money are kept offshore and remain untaxed and there is a danger money could be turned into different assets in an attempt to avoid new laws. According to the OECD the Government must therefore look at more than just back accounts.
It seems that the international tax regime has not kept up with the development of global financial institutions. Whereas a few years ago offshore accounts would have been used by a select few it has become much more common to move money around between tax territories.
The OECD says over the next two years it is desirable to introduce a system of automatic information sharing. The new system could be developed from an existing request based sharing system set up 4 years ago. It’s also believed within the OECD that there is now the political will to make the new system happen.
Some countries have already moved in the direction of information sharing with the US, UK, France, Spain, Germany and Italy all party to a fledgling system.
Campaigners have welcomed the news but believe any system should include developing economies many of which are denied tax revenue when income is kept abroad. Campaign group One says new measures taken by the G8 will help the fight against extreme poverty.