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UK Chancellor of the Exchequer George Osborne has called on Europe to back a new global standard to fight tax evasion and avoidance – already backed in principle by the G20, and following their recent meeting, the G7.
In a letter to European finance ministers sent ahead of their meeting in Brussels, the Chancellor asks them to back the automatic exchange of tax information between countries, based on a new multilateral agreement for both developed and developing countries. In his letter, the Chancellor explains that the EU needs to agree finally the amended Savings Directive – a more effective sharing of tax information in Europe – which has been delayed for several years. “Unless Europe can show it can agree on this existing proposal, our commitment to a new, stronger standard will not be credible”, the Chancellor writes.”It is a test of our seriousness – and the world is watching us.”
The amended Savings Directive will close loopholes in the existing Directive to make it much more difficult to sidestep the reporting requirements. More importantly, it will show that the EU is united behind increased automatic exchange of information. The new global standard for automatic exchange will go even further.
The Chancellor’s letter welcomes interest by some other Member States in joining the pilot for automatic exchange of information between the European G5 (UK, France, Germany, Italy and Spain). The pilot is based on the US anti-evasion FATCA legislation.
The British Overseas Territories, including the Cayman Islands, British Virgin Islands and the Turks and Caicos, have agreed to join this pilot. As well as information about individuals’ accounts, the pilot will automatically share information on certain accounts held by entities, such as trusts.
Britain has made tackling global tax evasion and avoidance a priority for its G8 presidency. The next steps include broadening the information sharing pilot to include more countries as a way of building up a global standard, giving support to developing countries so they can meaningfully make use of the standard, and backing OECD work to the define the standard in detail.
Beyond this, the UK’s G8 agenda also includes strengthening the global tax rules to ensure they reflect the modern economy and improving the availability of information on so-called ‘beneficial ownership’. This will maximise the practical benefits of tax information exchange, as well as tackling illicit finance.
Britain’s Overseas Territories have already committed to work with Britain on reviewing their legal and enforcement arrangements on beneficial ownership.
The Chancellor writes in his letter: “We now have a real prospect of delivering a step change in our ability to crack down on evasion through the creation of a single global standard on automatic information exchange, based on a multilateral agreement bringing together developed and developing countries.
“For Britain’s part, we are determined to use our presidency of the G8 this year to make progress.”