A rumour reaches me (let's say no more) that missives are heading towards Jersey, Guernsey, the Isle of Man and British Overseas Territories like Cayman, the British Virgin Islands and Gibraltar saying in no uncertain terms that the UK is not going to play second fiddle to the USA on tax information exchange.
There's good reason for this concern on H M Revenue & Customs' part. The USA has stolen a march on the rest of the world when it comes to demanding information on those who are using and abusing tax havens by introducing what is known as the Foreign Account Tax Compliance Act. Now this is a complex area, but the nub of it is simple. The US says:
FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
In essence, if a US bank wants to trade in a jurisdiction then that jurisdiction has to agree to put in place law to allow that US bank (and for this purpose any bank trading in the US is a US bank) to report to the US what assets it holds for a US citizen in that place.
It's right banks should be required to do this. Transparency of this sort shatters tax have secrecy, and so is a massively important step in ending secrecy jurisdiction tax evasion. But only the US has had the clout to unilaterally do this.
But as it has that clout countries are lining up to comply, including all the UK's tax havens.
And that's what is irritating Whitehall. I'm told the message being sent is very blunt and very clear: if this can be done for the USA then the UK is saying it can be done for us as well, and no excuses are being accepted. Quite right.
But then we get to Jersey - already having a problem or two with HMRC right now - and they're torn between the devil and the deep blue sea in deciding how to react. Do they comply and see their business fade away (because for all the bluster they know corruption is at the heart of all they do) or do they tell the UK and maybe even the USA to go and whistle - and be left with what will look like a remaining bunch of decidedly fringe banks offering dodgy deals to dodgy people.
I'm sure the same problem is being faced in St Peter Port and Douglas too, let alone Georgetown and beyond. But it's vital, and for once full marks to HMRC if this is the line they have adopted. It's spot on.
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But there remains the abuse by the transnationals.
Surely it’s a bit easier for the Americans with their worldwide taxation. Anyone presenting a US passport to open a bank account would be fed back. As a British Citizen, would it be for the bank instead of HMRC to decide if I was UK resident or not?
There is nothing in FATCA that is doing anything more than EUSD is already doing in most places. In fact, FATCA does less in that EUSD does not have minimum balances, where FATCA does – quite high ones at that. I doubt it will be implemented in anywhere near it’s current form. In fact, word has it, the deadlines imposed have just been kicked down the road another year.
I heard about the HMRC visits a few days ago, and as far as I know they are standard / regular compliance visits.
Oh dear, more misinformation….
And have you noticed Jersey does not do what the European Union Savings Tax Directive demands anyway?
In case you missed the first bit of your post, you mentioned a range of offshore centres. The visits are routine compliance visits (anti-money laundering procedures, etc.).
I know Jersey does not fully comply with EUSD.
Your comments are just disingenuous then?
Richard
Automatic exchange with the UK already exists for Guernsey and the Isle of Man under the EUSD. A FATCA style agreement would only impact on Jersey amongst the three CDs.
Don’t you believe it – it’s much wider than interest on accounts held in own names
Richard
Apart from the extra compliance costs, my onIy concern as a Guernsey-based trustee would be the practical cost of providing the information. My UK clients won’t be bothered about the information flow in itself as their structures are compliant and fully disclosed already, but they will certainly whinge about the added compliance costs being passed on to them, in which case those clients will ask to be instead looked after by one of our overseas offices which does not need that same level of UK reporting. Not a big deal really.
The banks in Jersey though will have a very different view indeed.
I have heard recently that the UK wishes to replace the old 1950s double tax treaties with the CDs with the OECD model treaty. This comes on the back of the decision by the CDs to sign up to FATCA with the US and seems perfectly reasonable request. It will kill a few planning opportunities, but there are EU treaty jurisdictions which work just as well so that business would just move as well.
Its all inevitable overall, although I do not see the Tory government rushing to get it through.
FATCA is worldwide
Have you really no understanding?
If you have to do this for FATCA you will have to do it for everyone in the end
Richard
Yes of course I understand that FATCA is worldwide. Why is it worldwide? Because the US has massive power, is the world’s largest economy and the US Dollar is the world’s number one currency. Anyone dealing with the US Dollar simply has to comply.
In comparison, the UK is a tiny pimple. There are many countries out there who couldn’t give a stuff about the UK or about Sterling. It is nothing like FATCA.
To the rest of the world, in relative terms its a bit like saying that they won’t be able to deal with Japan or France. So what? Big deal.
It is simply irrelevant to compare it with FATCA.
Ah, but you forget all these places are ours – and we can veto all their FATCA legislation unless they give us the same
I think there’s an unsubtle term for that – and yes – they are going to be that unsubtle
But you have missed my point. The CDs may be “ours”, but the Bahamas, Mauritius, Hong Kong, Singapore and Switzerland most certainly are not. Business would migrate there to avoid the compliance costs. Most CD trust businesses already have operations in several of those jurisdictions.
My gut feeling is that Guernsey and the Isle of Man will say “we have no problem with it but the cost of implementation is too great”. If the UK is happy to pay for its implementation then it can work. If not then all the UK related business moves away from the CDs to those other jurisdictions and the UK gains nothing at all.
Jersey on the other hand will probably declare independence!
We pick them off one by one
Rather like murderers, rapists and other criminals
As for Jersey independence – it would be insolvent in two years
Good luck on that front. No idea who you think “we” are, but the UK and EU have no sway over any of those jurisdictions and carry only a tiny fraction of the US’s weight. Bullies are no threat if they don’t intimidate.
I agree with you that Jersey would not survive independence. However they are stupid enough to try.
Where is the teeth in this FATCA? Havens will rush to comply (or say they will comply), but unless the IRS can directly access databases in these jurisdictions, they’ll never know for sure if they’re harbouring accounts for U.S. citizens. I guess it’s a question of risk for these offshore banks and secrecy jurisdictions. If a disgruntled employee decides to hand over data to the U.S. authorities, then “look out below”. Otherwise for many it will be business as usual. The other tact these havens and offshore banks may take is to ‘sacrifice’ smaller accounts, for the sake of holding on to the really large and wealthier U.S. citizens’ accounts. In this way, the really old and established big money families (no names mentioned but I think we know who some of those might be) will be untouched.
It’s an attack on the banks
If they want to trade in the US they will comply
I think it has a major chance of working – not perfectly – but nothing is ever perfect
It’s interesting that the U.S. DEMANDS other nations give them information, but do they apply the same rule to themselves? Not likely as this story indicates:
http://triblive.com/news/allegheny/2825138-74/tax-united-states-money-countries-secrecy-havens-accounts-foreign-foreigners
Seems that iom government is hoping to come up with more information about how much money they should be due under the sharing agreement.
http://www.energyfm.net/cms/news_story_241990.html