|Source: The Australian Financial Review|
There has been remarkable progress in the fight against tax evasion and
corporate avoidance in the past eighteen months.
This month it was announced that 47 countries had agreed to an
for Economic Co-operation and Development (OECD) framework that commits them to
"swiftly" pass new domestic laws that will allow them to collect information on
all bank accounts and automatically exchange it with other participating
The signatories include the significant financial centres of Singapore and
Switzerland (and besides Switzerland, the other 33 members of the OECD).
The Swiss government said on May 06 that the sharing agreement underscored
its commitment to tackling tax fraud and evasion. It said: “Switzerland supports
the OECD ministers’ declaration concerning the development of a new automatic
exchange of information (AEOI) standard in tax matters.”
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.”
Swiss law differentiates between tax fraud, which is a criminal offence and
tax evasion, which is treated as a misdemeanor.
Switzerland has long prospered on crimes committed beyond its borders.
However, in recent decades, it has been forced to agree to disclosures on the
proceeds of plundering by various dictators and the reputation of Swiss banking
was tarnished by revelations that the banks had looted the unclaimed wealth of
Nazi Holocaust victims.
Geneva, the Calvinist city that centuries ago had attracted wealthy French
families fleeing the revolution, a decade ago had about 140 private banks,
accounting for almost one in five of jobs in a city of 180,000 people.
Bruno Gurtner, chair of the global board, of the Swiss Tax Justice Network, in a
letter to the Financial Times in March 2009, disputed the claim that Swiss
secrecy laws “date back to 1934, when they were enacted partly to protect German
Jews and trade unionists from the Nazis.”
Gurtner said: "This is a big myth. The argument about it being set up to protect
Jewish money first appeared in the November 1966 Bulletin of the Schweizerische
Kreditanstalt (today Credit Suisse). The main reason bank secrecy was
strengthened in 1934 was a scandal two years earlier, when the Basler
Handelsbank was caught 'in flagrante' facilitating tax evasion by members of
French high society, among them two bishops, several generals, and the owners of
Le Figaro and Le Matin newspapers. Before that, there was professional secrecy
(such as exists between doctors and their patients), and violation was a civil
offence, not a criminal one as it is today. Swiss bank secrecy has always been
an effective way to attract foreign money."
In 2008 and 2009 the credibility of Switzerland’s largest bank,
country’s fabled banking secrecy and the Swiss wealth management industry fell
like dominoes under attack
from a concerted US campaign against tax evasion.
UBS was fined $780m (CHF693m) and the Swiss authorities handed over thousands of
client names to the US Internal Revenue Service.
The US Foreign Account Tax Compliance Act (FATCA),
which was signed into US law in early 2010 as part of the Hiring Incentives to
Restore Employment Act, requires foreign financial institutions to report
information regarding US persons maintaining accounts, and by directing that US
taxpayers report certain specified foreign financial assets with their tax
The OECD information exchange framework will have some teething problems and
Austria is seeking to delay implementation to 2017 while
Christian Aid has said that under the current terms of the
agreement, the world’s poorest countries will gain little or nothing, because
they are not yet in a position to provide reciprocal information while some
countries, including Switzerland, have also suggested that developing countries
cannot be trusted to keep information on their own taxpayers confidential, and
so will be excluded from the deal.
Nevertheless, progress has been impressive.
From January 2015,
VAT on e-commerce within the Union will be levied at the rate at destination not
at origin - for example Amazon moved its headquarters to Luxembourg because
the VAT rate was 15% compared with for example 23% in Ireland.
Corporate tax avoidance
In 2009, Barack Obama, the new US president, proposed anti-tax avoidance
measures. However, in the gridlocked US capital, the president's measures got
Then in late 2010 following big public spending cuts in the UK, protesters
against tax avoidance, mainly women, from a group called UK Uncut, began
occupying the high profile retail stores of the Arcadia group such as Topshop,
BHS, Burton, Miss Selfridge and Dorothy Perkins, controlled by Sir Philip Green,
one of Britain's richest men.
David Cameron, British prime
minister, had selected Green to
review efficiency in Whitheall and according to the Guardian, his report
published in October 2010 reported "shocking" wastage in the government's
procurement strategy. However, his suitability as a government adviser was
questioned because of his alleged tax avoidance. The newspaper
said the businessman banked the biggest pay cheque in corporate history in
2005 when his Arcadia fashion business, paid a £1.2bn dividend. The
record-breaking payment went to his wife, Tina, who lived in Monaco and was the
direct owner of Arcadia. Because of this arrangement no UK income tax was due on
Stories of big US consumer giants such as Apple, Amazon and Google paying no or
very low taxes in the UK prompted a commitment from the UK government together
with France and Germany to tackle tax avoidance which culminated in
commitments in in 2013 by the Group of 8 leading developed countries and
Russia, and the Group of 20 leading developed and emerging economies, to work
with the Organisation for Economic Co-operation and Development (OECD) to
produce new rules on disclosure and base erosion by 2015.
reported this week that having spent the past eighteen months claiming that
Ireland does not facilitate international corporate tax avoidance despite
overwhelming evidence to the contrary, the Irish Government has done a U-turn
and has signalled that it is ready to prepare for the reality of reform.
Today in The Irish Times, Feargal O'Rourke, the head
of tax at PwC Ireland, a unit of the Big 4 accounting firm, who has
gained a lot of business from selling 'Double Irish Dutch Sandwich'
schemes to US multinationals
writes in respect of the OECD's BEPS (base erosion
and profit shifting) international tax rules reform project::
Reading between the lines, it is clear our corporate residency rules have
been identified as the issue that needs to be addressed from a reputational
perspective. If we accept this principle, the only issue we are debating is
timing. Does Ireland benefit from addressing the issue before it is forced upon
it? I believe the balance of advantages lies in Ireland dealing with it on a
O'Rourke is suggesting that Ireland end its
offshore company facility that are effectively tax avoidance vehicles.
This is a major change and one which Finfacts
recommended to the OECD in a submission last month:
OECD BEPS Project: Ireland should embrace
corporate tax reform