Common Reporting Standard must include all major financial centres to be effective, warns the IFC Forum
Over 90 jurisdictions have agreed to implement CRS: the latest standard by which governments automatically exchange financial account information to prevent tax evasion. The British international financial centres – including Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Guernsey, Jersey and the Isle of Man – are all early adopters of the new standard.
However, the US has declined to join CRS, citing the extensive network of intergovernmental agreements it already has under the Foreign Account Tax Compliance Act (FATCA). Yet, FATCA was designed to require information reporting to the US, including information on accounts indirectly owned by individuals and trusts. Although US has agreed to supply basic information to other countries, it will not include information on accounts which are indirectly owned. CRS requires full exchange of information on indirectly held financial accounts so goes further than the obligations that the US accepts under FATCA, and would require the US to match the obligations of fully effective disclosure which the US has imposed on others.
As jurisdictions prepare to exchange CRS information from January 2017, the IFC Forum, which represents financial and professional services firms in the British international financial centres, questions whether the new OECD system will be effective without US participation. The IFC Forum is responding to a recent article in the Economist[1] which reports on the US’ decision to decline to join CRS and suggests that money is flowing into the US to minimise disclosure.
Jack Marriott, Chairman of the IFC Forum, said: “In order to be effective, CRS must be truly global. Is it viable without participation from the world’s largest financial centre? Similar concerns apply to other proposed transparency measures such as the availability of ultimate beneficial ownership information.”
Richard Hay, Counsel to the IFC Forum, adds: “Clients who wish to avoid CRS may move money to the US to take advantage of the lower disclosure standards which will apply there. As the OECD already appears to have recognised, it only takes one hole in the balloon for all of the air to go out. The US must participate if CRS is to be effective.”
The IFC Forum is a multi-jurisdictional private sector organisation with international law and accounting member firms operating across a number of British Crown Dependencies, Overseas Territories and other IFCs.
Current members are: Appleby, Attride-Stirling & Woloniecki, Bedell Group, Butterfield Group, Conyers Dill & Pearman, Harneys, Hassans, Maples and Calder, Mourant Ozannes, Ogier, Rawlinson & Hunter, Vistra Group and Walkers.
[1] The Economist, The biggest loophole of all, 20 February 2016: http://www.economist.com/news/international/21693219-having-launched-and-led-battle-against-offshore-tax-evasion-america-now-part