UK, Germany, France, Italy, Spain target tax havens
George Osborne, UK chancellor of the exchequer, on Thursday unveiled what he termed "a ground-breaking international deal" to automatically share information on the ultimate owners of companies with key EU allies, making it more difficult for firms to dodge tax or funnel corrupt funds.
Britain has initiated an agreement with Germany, France, Italy and Spain that will see tax and law enforcement agencies from the five countries exchange data on company beneficial ownership registers and new registers of trusts, allowing for more effective investigation of financial wrongdoing.
The chancellor has also written to G20 counterparts, along with finance ministers from Germany, France, Italy and Spain, urging progress towards a fully global exchange of beneficial ownership information in order to remove "the veil of secrecy under which criminals operate."
A global move towards interlinking country registries will provide, for the first time, international real-time access to tax and law enforcement agencies on company ownership.
The letter says:
The recent extensive leaks from Panama show the critical importance of the fight against tax evasion, aggressive tax planning and money laundering [ ] Criminals continue to find ways to exploit the cracks in the current system, setting up complex structures in various and often multiple locations to hide their activities [ ] As with tax evasion, this requires a global response.
The new agreement, was unveiled at the spring meetings of the International Monetary Fund in Washington, DC.
George Osborne said:
Today we deal another hammer blow against those who hide their illegal tax evasion in the dark corners of the financial system. Britain will work with our major European partners to find out who really owns the secretive shell companies and trusts that have been used as conduits for evading tax, laundering money and benefitting from corruption. It was Britain that led the world in pushing for the automatic exchange of personal tax data and encouraged the OECD to develop new rules for taxing multinationals more fairly.
Since the dozens of other countries have followed our example.
Now it is Britain and our European partners setting the pace on beneficial ownership transparency of not just companies but also trusts with a tax consequence — and I expect that the rest of the world will move to follow our example again.
It shows the benefit of working together. No single country can tackle international tax evasion alone — and Britain should never fool itself into thinking that it can do this by itself.
Osborne said that the European initiative will begin to explore the best way for countries to share this information, with a view to developing a truly global common standard in a two-step process leading to the interlinking of national registries.
The letter to G20 finance ministers, suggests that the OECD, alongside the Financial Action Task Force should take a lead role in developing new single global standard for such exchange and for the interlinking of registers.
Osborne said that a global exchange of beneficial ownership information will compound the effectiveness of the Common Reporting Standard (CRS) which was launched as a result of the UK’s G8 presidency.
The CRS will see more than 90 countries, including Overseas Territories and the Crown Dependencies, automatically exchange taxpayer financial account information, giving revenue authorities access to the data of accounts held by a country's taxpayers in these jurisdictions.
The UK is already set to receive this information from its Overseas Territories and the Crown Dependencies in 2016, one year earlier than the rest of the world.
From June 2016, the UK will be he first major country to have a register of company beneficial ownership in place. It has also decided to make the information public, and it will be free for anyone to access.
The G20 comprises the 19 leading advanced and emerging economies.
The New York Times reported this week that:
The United States government is close to issuing a rule that will for the first time require banks and other financial institutions to find out the identities of people hidden behind shell companies.
Carl Levin, the former US senator, who was a crusader against tax havens, wrote in an op-ed in The Guardian:
The United States is far behind. We now require more information to get a library card than to form a US corporation. That may be why the Panama law firm had a Nevada office. Bipartisan legislation pending in the US Congress requiring the collection of beneficial ownership information for US corporations has languished despite law enforcement pleas for action. The biggest impediment is opposition from the secretaries of state of our 50 states, who financially benefit from forming new corporations and don’t want to ask questions that might jeopardize their revenue. Our states need to wake up to the damage they are doing and stop forming corporations with hidden owners.
From right to left, Christine Lagarde, International Monetary Fund managing director, Luis De Guindos, Spanish minister of economy and competitiveness, Michel Sapin, French finance minister, Dr. Wolfgang Schäuble, German finance minister, George Osborne, UK chancellor, Pier Carlo Padoan, Italian finance minister and José Ángel Gurría Secretary General, Organisation for Economic Co-operation and Development (OECD) hold a press conference on announcing a joint action against tax fraud and money laundering April 14, 2016 at the IMF Headquarters in Washington, DC. IMF staff photograph/Stephen Jaffe