States agrees tax information swap

Finance ministers and tax chiefs from 51 countries signed an agreement yesterday to automatically swap tax information, which Germany’s finance minister said heralded the end of tax evasion via secret bank accounts.

“Let’s make a joint contribution to more transparency and fairness in our globalised 21st century,” Wolfgang Schäuble told a taxation conference of about 100 countries co-ordinated by the Organisation for Economic Cooperation and Development. The pledge from so many countries is the result of years of OECD efforts to facilitate tax authorities’ access to bank data.

OECD secretary general Angel Gurria said the taxation deal should “help to recover the trust the public today has lost” during the global financial crisis and economic downturn.

“Tax evasion is not just illegal, it is immoral,” Britain’s chancellor of the exchequer, George Osborne, told a news conference. “You are robbing from your fellow citizens and you should be treated like a common thief.”

Mr Schäuble had told German newspaper Bild before the talks that the OECD agreement was making tax evasion more difficult, adding: “Banking secrecy in its old form has had its day.”

The European Union has enforced the automatic exchange of interest income since 2005 and America’s Foreign Account Tax Compliance Act has required non-US institutions to provide US tax authorities with data on accounts since 2010.

The US was not a signatory in Berlin. Mr Gurria said it was having its own internal debate on taxes, but was a “very strong supporter of everything we are doing”. He added that Switzerland was part of the process but was not one of the 51 states which had agreed to be “early adopters” before the 2018 deadline.

Mr Schäuble said the OECD deal “would not have been possible without FATCA, which was the trigger for our own process”. The “G5” biggest European economies — Germany, France, Italy, Spain and the UK — have negotiated with Washington for FATCA to be implemented reciprocally.

Mr Schäuble has campaigned for the EU to close loopholes used by multinational firms to reduce tax bills by exploiting differences in national tax rules. He is now targeting “patent boxes” that permit firms tax breaks on profits generated by patented research.

But the 72-year-old minister said he had no illusions that the ancient art of tax evasion would be consigned to history. “The risk of being found out becomes very high. But as long as people exist, they will not all obey the law. They’ll work out new ways to dodge taxes.”

Reuters