Shinzō Abe, Japan's prime minister (fifth from right), and Angel Gurría, OECD secretary-general, with a group of Japanese at OECD headquarters, Paris, May 06, 2014.
In a huge blow against the use of bank secrecy in offshore tax havens to
engage in personal tax evasion with impunity, Switzerland and Singapore, two of the
world's biggest offshore financial centres, agreed on Tuesday to join an
Organisation for Economic Co-operation and Development's (OECD) system for the automatic
exchange of banking information between jurisdictions.
on Automatic Exchange of Information in Tax Matters was
endorsed during the OECD’s annual Ministerial Council Meeting in Paris by all 34
member countries (which includes all the developed world economies), along with
Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia,
Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa.
The Declaration commits countries to implement a new
single global standard on automatic exchange of information. The standard,
which was developed at the OECD and endorsed by G-20 (group of twenty leading
developed and emerging economies) finance ministers last February, obliges
countries and jurisdictions to obtain all financial information from their
financial institutions and exchange that information automatically with other
jurisdictions on an annual basis.
“Tax fraud and tax evasion are not victimless crimes: they deprive governments
of revenues needed to restore growth and jeopardise citizens’ trust in the
fairness and integrity of the tax system,” Angel
Gurría, OECD secretary-general, said. “Today’s commitment by so
many countries to implement the new global standard, and to do so quickly, is
another major step towards ensuring that tax cheats have nowhere left to hide.”
The OECD will deliver a detailed commentary on the new standard, as well as
technical solutions to implement the actual information exchanges, during a
meeting of G-20 finance ministers in September 2014.
G20 governments have mandated the OECD-hosted Global
Forum on Transparency and Exchange of Information for Tax Purposes to
monitor and review implementation of the standard.
More than 60 countries and jurisdictions have now committed to early adoption of
the standard, and additional Global Forum members are expected to join this
group in the coming months.
The Swiss Bankers Association said: “The banks in Switzerland are willing to
adopt the automatic exchange of information along with other financial centres,
provided that the exchanged information is only applied for tax purposes.”
It added that it would require “fair solutions”
to handle past non-compliance, as well as reciprocal information exchange. It
said: “Reciprocity should apply and structures like trusts be part of
information exchange. Furthermore the banks expect fair solutions for untaxed
assets of the past in order to implement the standard with each country.”
"It's clearly the end of bank secrecy abused for
tax purposes," Pascal Saint-Amans, tax director at the
OECD, told journalists in Paris Tuesday. "It means that governments
can really assess the tax owed by people who thought they could hide in other
The FT reports that the Swiss government has
highlighted the lack of transparency concerning the ownership of US companies,
which are subject to limited disclosure rules. “Switzerland also expects the
special provisions that apply in the United States regarding the transparency of
beneficial owners to be of a temporary nature,” it said.
The new system is expected to become operational
in 2017 and tax havens that refuse to join the system will likely be
According to the Boston Consulting Group, there was $1.2tn in offshore wealth
assets held in Singapore and Hong Kong in 2012.
UK position on beneficial ownership
The "honest Swiss"; tax secrecy and the cost of servicing wealthy
In a related development,
Singapore has agreed to share information with the US under a new law aimed at
preventing offshore tax evasion by American citizens.
The city-state is one of Asia's biggest financial centres and is forecast to
overtake Switzerland as the world's largest wealth management centre.
It will participate in the Foreign Account Tax Compliance Act (FATCA), which
takes effect on 1 July.
The move provides a boost to US efforts to clamp down on tax-dodgers.
The US intergovernmental agreement with Singapore was agreed "in substance" and
is set to be finalised by the end of the year.
It requires financial firms to report information on US account-holders to the
relevant tax authorities.