Is UK planning Fatca-style rules for Overseas Territories?
The UK Government yesterday declined to comment on a report claiming it plans to implement its own equivalent of tough US Fatca rules on British territories including Bermuda, as it announced new plans to clamp down on tax-dodging companies and individuals.
The International Tax Review (ITR) reported last month that it had obtained a leaked document revealing draft British Fatca-style legislation, despite the official UK Government line being that such a method is not considered an appropriate means to combat tax evasion.
The US Foreign Account Tax Compliance Act (Fatca), which will come into force in the middle of next year, requires foreign banks to report American account holders details to the US Inland Revenue Service. A 30 percent withholding tax on all transactions done with the US will be imposed on those institutions that do not comply.
A spokeswoman from the UK Treasury yesterday declined to comment on the leak in response to questions from The Royal Gazette.
Bermudas Ministry of Finance, asked for a comment on the prospect of potential Fatca-style legislation from the the UK, said yesterday: The Ministry of Finance has been aware of this subject prior to recent press reports and has proactively taken appropriate action. The Ministry declined to give further detail.
According to ITR, the draft legislation would require automatic information exchange on all relevant transactions for each reportable account of each reporting financial institution.
This would include all details of beneficial owners of the account, including those whose identities might otherwise be hidden by trusts.
This would have some significance for Bermuda, but would be a more serious threat to larger offshore banking centres like the Cayman Islands.
In a statement yesterday, the UK Treasury described a new UK-US agreement to improve international tax compliance and to implement Fatca as an enhanced automatic tax information exchange agreement which sets a new standard in international tax transparency and strengthens HMRCs (Her Majestys Revenue and Customs) ability to tackle offshore evasion.
The statement also hinted at plans to establish more reciprocal relationships of this kind, adding: The Government will look to conclude similar agreements with other jurisdictions.
Richard Murphy, of the Tax Justice Network, who has long campaigned against tax avoidance and evasion, told the ITR: The evidence is now clear: the writing is on the wall for secrecy in the UKs tax havens.
There are now only two options for those hiding their funds in these locations. The first is to own up now. Thats the wise option. Its the only safe option. The alternative is to flee. My suspicion is that its already too late for that to work.
The ITR says it expects an announcement from the UK Government next autumn, with the legislation coming into effect on January 1, 2014.
UK Chancellor of the Exchequer (Finance Minister) George Osborne said yesterday: The action we are announcing today will help HMRC close in not only on those who seek to avoid or evade tax, but on the dubious cowboy advisers who sell them the schemes and dodges they use to cheat the law-abiding majority.
The UK Treasury believes the clampdown will help it to bring in an extra £2 billion ($3.6 billion) by 2014-15.
Last month, the UK Government came out against a recommendation in a report by International Development Committee on Tax in Developing Countries: Increasing Resources for Development to implement Fatca-style rules .
In its response to the report, the UK stated: The Government is fully committed to tackling tax evasion and sees transparency and information exchange as key tools but does not regard the introduction of Fatca in the UK as an appropriate means to achieve this.
Fatca is unilateral and extraterritorial in its approach and has created significant difficulties for the US as well as affected countries in its implementation.
The UK approach is to work in partnership with other governments, including those in developing countries, to increase tax transparency and exchange of information.
The Government works closely with the G20, EU and OECD to deliver real progress in international tax transparency and substantially increase levels of information exchange.
Bermuda has a tax information exchange agreement (TIEA) with the UK. The Island also serves as a vice-chair of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes Steering Group.
Rio trip: $5,500 empty rooms bill
Expert slams OBA over new airport
Police: We are not sports team bodyguards
Introducing Bermuda’s very own Super Mom
Flying car could make debut at America’s Cup
Lloyd’s CEO claims island stole ILS business
Thief: I stole to support my four children
Family’s crippling medical bill
Veteran Gombey captain Warner dies
Cruise ship boost ‘amazing’ for St George
Police to record hate crimes against LGBT
Burglar jailed for $10,000 crime spree
Creative spirit making her mark
Prayer vigil held for Tweed
Woman admits stealing from sister
Take Our Poll