U.K. Behind on Laws to Target Hidden Offshore Wealth: Tax Agency

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By Ben Stupples

The U.K. has fallen behind other countries in forging data-sharing powers that governments need to target individuals hiding assets or income overseas, according to the country’s tax authority.

U.K. laws are “out of step” with the latest approaches for governments to swap data, such as the OECD-led common reporting standard, the authority said in a July 10 consultation document.

The comments from Her Majesty’s Revenue and Customs come as it seeks input on updating the U.K.’s existing laws to make the processes for requesting taxpayer data less time-consuming.

According to the consultation, the U.K.’s current laws for data sharing date to 2008 and are creating problems for HMRC’s requests for information from third parties, such as banks. The data-swapping process required for the OECD’s CRS “contrasts markedly” with existing laws, it said.

Historically, those seeking to evade taxes could often hide their wealth in offshore accounts. Yet the CRS will give governments unprecedented information on their citizens’ overseas activity.

Under the measure, financial institutions will disclose data on foreign account holders to their local tax authority. Once a year, the authority will then automatically exchange any relevant information with their counterparts overseas, and thus allow governments to home in on tax evaders. In September, nearly 100 jurisdictions will exchange data with each other through the CRS.

Time-Consuming

The comments from Her Majesty’s Revenue and Customs come as it seeks input on updating the U.K.’s existing laws to make the processes for requesting taxpayer data less time-consuming.

While it officially comes into effect in September, more than 40 jurisdictions chose to introduce the CRS and subsequently exchange taxpayer information at the end of September 2017.

So far, the Paris-based Organization for Economic Cooperation and Development has recorded more than 3,200 agreements between countries to exchange information under the measure.

Banks, asset managers, and trusts all fall under the financial entities required to report with the CRS.

In line with disclosure obligations, financial institutions have to identify foreign account holders and then disclose certain information for them, including names and addresses, and taxpayer numbers.

Five-Nation Tax Taskforce

On top of the CRS, the U.K. government is taking extra steps to target offshore tax evaders.

HMRC has teamed up with tax authorities from Canada, the Netherlands, the U.S., and Australia to tackle international tax crime, according to a July 2 news release from HMRC.With their focus on criminal activity, the five countries’ task force contrasts to the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration of 38 tax authorities.

By working together, the tax authorities are looking “to turn the tables” on offshore evaders that have fragmented their activity to avoid detection, a senior HMRC official told Bloomberg Tax.

“We want to make that fragmentation more of a vulnerability,” said Simon York, HMRC’s fraud investigation service director. “If they’ve got a footprint in lots of locations, we’ve got more places that we can attack that criminality. This is all about action and working together operationally.”

To contact the reporter on this story: Ben Stupples in London at bstupples@bloombergtax.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bloombergtax.com

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