UK’s territories keep schtum on ‘son of FATCA’ report, pending meeting
By Helen Burggraf , Contributing Editor , International Adviser
Spokesmen for some of the UK’s key overseas territories said little beyond the fact that they look forward to meeting UK Government officials imminently to discuss the possibility of their exchanging more information with the UK, in the wake of a report that the UK is seeking to impose its own version of the US Foreign Account Tax Compliance Act on them.
The report, in the online International Tax Review on Friday, said the ITR’s journalists had seen a copy of a leaked draft of a government document detailing how the scheme would work.
The ITR report referred to the plan as a ‘son of FATCA’ scheme, after the new US law which obliges foreign financial institutions throughout the world to provide information to the Internal Revenue Service on its taxpayers.
“Interest has been shown by the OECD and the EU in the possible wider application of the principles behind the US FATCA arrangements, and the UK has approached the Crown Dependencies and the Overseas Territories with a view to the principles possibly being more widely applied to an exchange of information with the UK,” Jersey and Guernsey said, in identical prepared statements.
“Officials from the three Crown Dependencies will be meeting HM Treasury officials shortly to understand what exactly the UK has in mind.”
“Shortly” was understood to be within the week, according to a person familiar with the situation, who noted that the meeting had been scheduled before the ITR story broke.
The Isle of Man Government said it was “well aware of the movement towards automatic exchange of information as the new global standard in international tax co-operation”, a movement that it noted currently involves efforts on the part of the G20, the Organisation for Economic Cooperation & Development and the European Union, in addition to FATCA.
“Not surprisingly, we have been discussing the implications of all this with the United Kingdom and with our fellow Crown Dependencies in the Channel Islands, and that dialogue is continuing.”
Gibraltar officials did not immediately reply to requests for comment. In the Cayman Islands, a spokeswoman for the Ministry of Finance said officials there had seen a draft document, as part of “continuing” discussions with the UK that commenced most recently in July 2012.
“These discussions have been useful,” she said.
Like the Jersey, Guernsey and Isle of Man comments, that of the Cayman Islands did not indicate whether the jurisdiction did or did not welcome the possibility of its financial services industry having to begin providing additional amounts of information about its clients to the British government. Some of those outside the governments, however, were less measured.
Among them was Cayman Islands Stock Exchange chairman Anthony Travers OBE, who, in a letter to London’s Observer newspaper, which published its own version of the ITF story, argued that the focus on “tax-transparent offshore jurisdictions” was “misguided”, and “simply perpetuates the UK’s tax collection problem by deflecting proper consideration from the real issues”.
Noting that the Cayman Islands “has had full proactive tax reporting with all EU Treasury departments since 2005, and has full disclosure tax information agreements with HMRC and the IRS and many others”, Travers, who is a former chairman of Cayman Finance, also argued that “publicly-available statistics reveal bank deposits in Cayman from EU residents to be statistically irrelevant”.
“So too would be any additional measures to ‘improve’ transparency, whatever they could now possibly be”, Travers went on, in a comment that was also signed by Jack Irvine, executive chairman of a UK public relations company, Media House.
“Credit here must be given to Mr Ed Balls [UK shadow chancellor], who rightly identifies the UK problem as being tax avoidance – that is to say, lawful tax minimisation based on UK tax legislation.
“The Starbucks, Google, Amazon issue with which transparency is wrongly conflated can be traced to the hopelessly ineffective Anti-Transfer Pricing Guidelines produced with fanfare after a decade’s work by the OECD and adopted by most G20 jurisdictions.”
David Kneeshaw, a UK life insurance industry executive who said he spoke in his role as chairman of the Isle of Man’s Manx Insurance Association, took a slightly different view, although like Travers, he noted that there is already a high level of information reporting going on.
The trend towards greater exchange of information is “clear, and not necessarily problematic”, he noted. “It seems someone is trying to ‘reinvent the wheel’, or at the very least is stirring up something out of nothing.
“IOM life companies already notify HMRC when certain events take place (Chargeable Event Reporting). And policyholders should be fully aware that their information may already be provided to HMRC when they buy the product.
“As such, dialogue is already taking place, and has been for over 10 years.”
Other sources noted that the idea of a “UK FATCA” had, as one put it, “the fingerprints all over it” of such organisations as Tax Justice Network and Christian Aid, which campaign for greater transparency in offshore financial centres, on the grounds that billions are being hidden from the world’s neediest as a result of banking secrecy.
As reported here yesterday*, the ITR report noted that the draft agreement it had seen would “require the automatic exchange of information for each reportable account of each reporting financial institution”.
“That would include full details of all beneficial owners of the account, including those whose identities might otherwise be hidden by trusts or companies,” it added.
“It will also require the account number, name and indentifying number of the reporting financial institution as provided when registering with the IRS for FATCA purposes, and the account balance or value as of the end of thr relevant calendar year or other appropriate reporting period or, if the account was closed during such year, immediately before closure.
The document seen by ITR appeared to contradict a statement by the Government last week in which it “publicly rejected the need for a UK version of FATCA” in a response to an International Development Committee report, the ITR noted.
The ITR said it understood an “autumn” (2013) announcement from the Government would set the plan in motion, “with the legislation coming into effect on January 1, 2014”.
End
*British Government rumoured to be planning ‘son of FATCA’ for overseas territories
Britain’s overseas territories, including the Crown Dependencies, Gibraltar and the Cayman Islands, are expected to be seeking official confirmation with some urgency of a report that the UK government is planning a ‘son of FATCA’ aimed at obtaining information on all accounts held by British taxpayers.
News of the plans emerged in a report last Friday in International Tax Review (ITR), which said it had seen a copy of a leaked draft of a government document detailing how the scheme would work.
The ITR report referred to the plan as a ‘son of FATCA’ scheme, after the US Foreign Account Tax Compliance Act which demands information of foreign financial institutions on its taxpayers.
“The draft agreement…will require the automatic exchange of information for each reportable account of each reporting financial institution. That would include full dteails of all beneficial owners of the account, including those whose identities might otherwise be hidden by trusts or companies.
“It will also require the account number, name and indentifying number of the reporting financial institution as provided when registering with the IRS for FATCA purposes, and the account balance or value as of the end of thr relevant calendar year or other appropriate reporting period or, if the account was closed during such year, immediately before closure.
“The move will deal an almost-fatal blow to tax evasion through the UK’s tax havens”, the ITR report went on, adding that it is “a coup for the Tax Justice Network, which has long been arguing for automatic information exchange”.
The document seen by ITR appeared to contradict a statement by the Government last week in which it “publicly rejected the need for a UK version of FATCA” in a response to an International Development Committee report, the ITR noted.
But “in private…the Government has already drafted [this] legislation, which it will impose on its Crown Dependencies and Overseas Territories…[including] some of the world’s most notorious tax havens, such as the Cayman Islands, the Channel Islands and the Isle of Man.”
The ITR said it expected an “autumn” (2013) announcement from the Government, “with the legislation coming into effect on January 1, 2014″.
The news will not come as a surprise to some observers, who have seen a global move towards greater willingness on the part of governments – particularly in the wake of the global financial crisis – to cooperate in an effort to boost their tax take from the large number of individuals many governments believe are hiding significant amounts of wealth offshore.
Some 14 months ago, Debbie Payne, a director of tax at PwC in London and an expert on FATCA, told an audience of private equity industry officials that there was “a distinct possibility” that certain European countries would decide to “break away” from the rest of the pack “and bring in their own domestic, FATCA-like regimes”.
She observed that the Americans were surprised at the negative response much of the rest of the world had shown to FATCA, since, she noted, the genesis for the plan had come out of meetings held by the G7 and G8 countries following the financial crisis, and subsequent discussions.
“They’re saying, ‘you were sitting in the same meetings as we were with the OECD, and you didn’t say [at that time that] you couldn’t or didn’t want to comply with this; so why are you getting so concerned when all we are doing is going first?’”
For more on both these stories go to:
http://www.international-adviser.com/news/uk/uks-territories-keep-schtum-on-son-of-fatca
