May 2, 2013 12:04 am

Tax havens agree to more transparency

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Cayman Islands©Dreamstime

Hedge fund home no more?: the directive coincides with the Cayman Islands lifting the veils of secrecy

Britain’s Overseas Territories have bowed to pressure for greater tax transparency, in a move the government has hailed as “a turning point in the fight against tax evasion and illicit finance”.

The Treasury announced that Anguilla, Bermuda, the British Virgin Islands, Montserrat and the Turks and Caicos Islands have followed the Cayman Islands by agreeing to share information automatically with Britain, France, Germany, Italy and Spain.

George Osborne, the chancellor, said: “This represents a significant step forward in tackling illicit finance and sets the global standard in the fight against tax evasion.”

He urged other governments to follow suit in an effort to remove “the hiding places for those who seek to evade tax and hide their assets”.

The move by offshore centres to increase transparency follows the introduction of new legislation in the US, known as the Foreign Account Tax Compliance Act, which threatens financial institutions with heavy withholding taxes if they do not comply.

A series of evasion scandals and widespread budget crises across the developed world has added to pressure for a clampdown on offshore havens.

The new agreements will involve the sharing of extensive information on bank accounts with Britain, France, Germany, Italy and Spain. The Overseas Territories will automatically provide names, addresses, dates of birth, account numbers, account balances and details of payments made into those accounts.

The Isle of Man, the first non-US jurisdiction to agree to greater exchange of information with the UK, has agreed to join the multilateral initiative. Guernsey has also expressed a “clear” interest, the Treasury said. It, along with Jersey, has already agreed to exchange tax information automatically with Britain.

The offshore centres have viewed the move towards greater transparency as important in underpinning their reputation as compliant and well-regulated financial centres.

However, they have voiced fears about compliance costs, the extent of the information they are required to share, and the potential loss of business to centres that promise more confidentiality.

The government has stepped up its pressure on the Overseas Territories and Crown Dependencies in recent months as part of its presidency of the Group of Eight wealthy nations this year. David Cameron wants to reach agreement among the G8 for co-ordinated international action to tackle evasion and corporate secrecy.

The proposed crackdown on corporate secrecy would require action by large countries, as well as offshore centres, to collect and publish information on the beneficial ownership of companies. A failure to collect information on the ultimate ownership of companies in many jurisdictions has offered scope for money laundering, corruption and tax evasion.

The Treasury said it was working closely with offshore centres to promote transparency. In a letter to the European Commission last week, Mr Cameron said they were working on further steps “to demonstrate their steadfast political and practical commitment to tackling tax evasion”.

It set out the UK prime minister’s ambition to make the European Council and the G8 summit next month “the turning point in the battle against tax evasion and avoidance and the restoration of confidence in the fairness and effectiveness of our tax systems”.

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