New international agreements mean tough sanctions on hiding undeclared income offshore, as more and more countries agree to share information on offshore accounts.
G5 finance ministers are proposing further steps to promote greater tax transparency and co-operation on a global scale in a bid to tackle tax evasion and avoidance. The new global standard of automatic exchange of tax information, which has been developed by the OECD and endorsed by the G20, will be signed by the G5 together with other jurisdictions committed to early adoption, at the G5 October Global Forum meeting.
Already 44 jurisdictions have joined the initiative and will begin to automatically exchange information with each other in 2017. The data will be collected from 31 December 2015.
Andrew McKenna, Tax Investigations Partner at Smith & Williamson, a member firm of Nexia International, comments: “The net is closing as more and more countries endorse the new global standard in exchange of information.
“Individuals are urged to come forward voluntarily to make a full disclosure of undeclared offshore tax-related matters before governments gain access to offshore data – or risk incurring fines and, in the most serious cases, criminal prosecution.
Exchange of information (EOI) agreements are entered into where there is no formal tax treaty in place, typically with tax havens. Broadly, a tax treaty is an agreement between two countries where both countries want to tax the same income or assets. The treaty seeks to avoid double taxation. A tax haven tends to have little or no tax, so there is no need for a treaty. More recent tax treaties tend to incorporate an EOI article as a matter of course.
Tax disclosure facilities provide people with a limited window of opportunity to come forward voluntarily to clear up their tax affairs. The UK, for example, recently signed disclosure facility agreements with Jersey, Guernsey and the Isle of Man, ahead of planned information exchange between the countries. The US launched the FATCA (Foreign Account Tax Compliance Act – designed to target non-compliance by US taxpayers with foreign accounts) agreement and there has been increased membership of the Convention on Mutual Administrative Assistance in Tax Matters – including Switzerland and Luxembourg.
The UK government is shortly expected to unveil new transparency proposals for other offshore jurisdictions including the British Virgin Islands and Cayman Islands.
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