12 August, the Tax Chamber of the First-tier Tribunal ordered over 300 banks to give details to HM Revenue & Customs (HMRC) about their customers who hold offshore accounts. HMRC will use this information to ensure that disclosures under the New Disclosure Opportunity (NDO) are complete. The orders followed similar writs being obtained in 2007 against the five major UK High Street banks, Barclays, HBOS, HSBC, Lloyds TSB and Royal Bank of Scotland. The new orders apply to an estimated 500,000 offshore bank accounts. HMRC can now issue the information notices to banks ahead of the NDO, which will enable people with unpaid taxes linked to offshore accounts or assets to settle their tax liabilities at a favourable 10% penalty rate. Dave Hartnett, HMRC Permanent Secretary for Tax, said: “I know there are people who regret not taking advantage of our Offshore Disclosure Facility (ODF) in 2007 which focused primarily on the customers of five large banks. Today we have successfully applied to get information on the offshore accounts and assets of customers of over 300 further banks. I urge any of them who have unpaid tax liabilities connected to these accounts now or in the past to come forward and make a full disclosure during the NDO because we will use the information provided by the 300 banks to pursue those people who continue to flout the UK’s tax laws.”
24 August, the Antigua Ministry of Finance appointed John Benjamin as administrator and chief executive officer at the Financial Services Regulatory Commission (FSRC). He replaces Leroy King who was indicted for involvement in the alleged fraud perpetrated by Texas financier Allen Stanford. Benjamin was previously managing director of TCI Bank in the Turks and Caicos Islands. His appointment will run for a period of six months.US prosecutors allege that Stanford and other executives of the now defunct Houston-based Stanford Financial Group orchestrated a massive Ponzi scheme by advising clients to invest more than $7 billion in certificates of deposit from the Stanford International Bank in Antigua. They also allege that King accepted bribes to ignore the fraud and wrote false and misleading letters to the US Securities and Exchange Commission. He awaits extradition to the US.
23 April, the Australian Taxation Office (ATO) committed to adopting all the recommendations in a report that examined confidentiality within the government’s $300 million multi-agency Project Wickenby tax fraud investigation. The ATO is expected to propose major changes to its culture, policies and procedures in a report to Parliamentary Joint Committee of Public Accounts and Audit.The report, produced by lawyer Dale Boucher, found systematic breaches of the law by ATO officers participating in Project Wickenby. It raised serious concerns about mismanagement and inappropriate collusion between the ATO, the Australian Crime Commission and the Australian Federal Police.
1 September, the Austrian parliament approved a law relaxing banking secrecy regulations to enable exchange of tax information in cases where there is “justified suspicion” of wrongdoing. Previously such information has only been supplied in cases where criminal procedures against an individual have been started, and then only if a court order has been issued. The move will enable Austria to begin signing tax information exchange agreements (TIEAs).Austria was the last European Union member state on the OECD?s “grey list” of countries that have committed to its standards on exchanging tax information but not yet “substantially” implemented them. The other EU member states, Belgium and Luxembourg, have already revised their banking secrecy laws and been removed from the OECD list.The Austrian parliament had previously rejected one version of the Bill in July, but Austria’s governing coalition won the support of two opposition parties to secure the two-thirds majority needed to approve the change. The European Investment Bank had warned Austria that its banks could be excluded from financing if it did not reform by the March 2010 deadline.
18 May, the House of Assembly passed the External Insurance Act 2009 which expands the definition of external insurance business to include for the first time the explicit mention of captive insurance and replaces the complicated calculation of capital requirements by reference to the company?s net worth in favour of a straightforward fixed capital requirement, depending on the nature of the business the company proposes to carry on.The Act introduces two classes of licence: restricted external insurers for single parent captives and group captives; and unrestricted external insurers for rent-a-captives. External insurers will be exempt from the payment of any tax, fee, duty or impost other than those in force at the commencement of or payable in respect of registration under the Act for a period of 15 years from the date of the first registration of the insurer,
26 June, Finance Minister Zhivargo Laing announced in the House of Assembly that a Financial Services Authority is to be created through an Act of Parliament to improve regulation of the industry in The Bahamas. The government is giving ?renewed focus? to the financial services sector, the second pillar of the Bahamian economy, Laing said. Laing said the chief executive officer of the Authority would assume responsibility for insurance, securities and compliance, in a twin system in which the Central Bank would regulate banks and trust companies. The Act would also provide for the creation of departments for marketing, authorisation and audit or inspection.
8 May, the Belgian government decided to amend Belgium’s rules on the participation exemption to fall in line with the European Court of Justice’s decision in Cobelfret v Belgium (C-138/07), such that Belgian companies will now be able to carry forward the deduction for dividends received.Cobelfret, a Belgian company, incurred tax losses in 1994, 1995 and 1997, but had insufficient profits in 1996 to claim the full 95% dividends received deduction on dividends received from Belgian and UK subsidiaries. The Court of Appeal of Antwerp referred the case to the ECJ, which held on 12 February 2009, that the Belgian participation exemption was incompatible with the EU Parent-Subsidiary Directive because it did not effectively refrain from taxing dividends in some situations.Dividends received were always included in the Belgian parent’s tax basis but could always be deducted because the deduction was disallowed if the parent had no, or insufficient, taxable profits for the relevant period. As a result Belgium did not effectively refrain from taxing dividend income in all situations. The ECJ also refused to limit the effect of its judgment in time, such that Belgian courts must also apply the decision to dividends received in the past by Belgian parent companies.
15 June, the Cayman Islands signed a new tax treaty with the UK in London. The arrangement includes provisions on exchange of information that meet OECD standards on tax transparency. The treaty will come into force as soon as both governments have completed the legislative procedures to give it effect.The UK taxes covered are income tax, corporation tax, capital gains tax, and for the purposes of the exchange of information provisions only, inheritance tax and value added tax. The double taxation provisions cover business profits, remuneration and pensions of individuals, payments to students and apprentices, and profits and gains of enterprises from shipping and air transport in international traffic.
22 April, the PRC?s State Administration of Taxation (SAT) issued a Notice to provide guidance on the determination of tax residence status of Chinese-controlled offshore companies under the new place of effective management and control rule in the 2008 Enterprise Income Tax Law (EIT Law). The Notice may have a significant impact on Chinese companies listed on a foreign stock exchange and the round tripping of investments. The provisions applied retrospectively from 1 January 2008.The Notice sets out detailed rules for determining whether a Chinese-controlled offshore-incorporated enterprise is a tax resident of China, describes the tax implications of being regarded as a tax resident, and sets out the procedures for an assessment of residence status by the relevant local tax bureau.A Chinese-controlled offshore enterprise is defined as an enterprise that is incorporated under the laws of a foreign country or territory but has a domestic (Chinese) enterprise or enterprise group as its primary controlling shareholder. It will be regarded as a Chinese tax resident and be subject to EIT on its worldwide income by virtue of having a place of effective management and control in China.
16 April, Cyprus and Russia signed a new tax treaty that should ensure the island?s removal from Russia?s tax haven “blacklist?. Russia is one of Cyprus’s biggest trading partners. Ministry officials estimate Russian deposits in Cypriot banks to exceed €20 billion. But Russia blacklisted Cyprus in early 2008 on grounds that there was insufficient cooperation on exchange of information.Cypriot Finance Minister Charilaos Stavrakis said the agreement was “very significant and beneficial” for both countries because it would remove double taxation on assets and business activities for both individuals and companies?. Ilya Trunin, director of the Russian Finance Ministry’s tax department, said Cyprus would be dropped from the blacklist once the agreement comes into effect.Cyprus also signed a tax treaty with the Czech Republic on 28 April, which is to replace the previous agreement between Cyprus and the former Czechoslovakia dating from 1980.
28 April, the European Commission adopted a Communication identifying actions that EU member states should take to promote “good governance” in the tax area, including steps to improve transparency, exchange of information and fair tax competition. To improve good governance within the EU, the Commission calls on Member States to: adopt as soon as possible its recent proposals to ensure effective administrative cooperation in the assessment of taxes which would, in particular, prohibit Member States in future from invoking bank secrecy laws as a justification for not assisting the tax authorities of other Member States; ensure administrative cooperation in the recovery of tax claims; and improve the functioning of the Savings Tax Directive, in particular by extending its scope to intermediate tax-exempted structures (trust, foundations etc) and to income equivalent to interest obtained through investments in some innovative financial products.To promote good governance in the relations with third countries, the European Commission proposes to improve the particular tools that the European Community and EU Member States may have at their disposal to promote good governance internationally, including: enhancing good governance principles in relevant EU-level agreements with third countries as well as through development cooperation incentives and, where appropriate, coordinated action against jurisdictions that refuse to apply good governance principles.László Kovács, Commissioner for Taxation and Customs, said: “EU Member States cannot afford to act alone when designing policies to prevent their tax revenues disappearing to tax havens or non-cooperative jurisdictions If they do not cooperate with each other, including in international fora, their actions to protect their revenues will not produce effective results.?
11 June, the European Court of Justice held that an extended recovery period in cases where taxable assets, which have been concealed from the tax authorities, are held in another member state is in accordance with European law and does not exceed what is necessary to guarantee the effectiveness of fiscal supervision and to prevent tax evasion.In X and E.H.A. Passenheim-van Schoot v Staatssecretaris van Financiën, the Special Taxation Inspectorate in Belgium had, in October 2000, forwarded to the Netherlands tax authorities information on financial accounts held in the names of Netherlands residents at Kredietbank Luxembourg (KB-Lux), a bank established in Luxembourg. In 2002, after examination of that information, X, who had been the holder of such an account since 1993, received an additional assessment containing adjustments in regard to wealth tax and income tax for the tax years from 1993 to 2001 together with an additional 50% penalty.In January 2003, following her husband?s death, Mrs Passenheim-van Schoot made a full voluntary disclosure to the Netherlands tax authorities of previously undisclosed balances held by herself and her late husband at a bank established in Germany. No penalty was imposed but she received additional assessments concerning the tax years from 1993 to 1997.X and Mrs Passenheim-van Schoot challenged the tax authorities? decisions on grounds that the extended recovery period laid down in the Netherlands legislation for a taxable item held abroad was contrary to Community law. The Supreme Court of the Netherlands asked the ECJ to rule whether Community law over-rode the Netherlands legislation under which the recovery period is five years if the savings balances are held in the Netherlands but is extended to 12 years if held in another member state.The ECJ noted that such legislation constitutes a restriction both of the freedom to provide services and of the free movement of capital, which is prohibited, in principle, by the EC Treaty. But it held that the legislation contributed to the effectiveness of fiscal supervision and to the prevention of tax evasion and these constituted overriding requirements of general interest capable of justifying such a restriction.
25 June, the European Commission referred Luxembourg to the European Court of Justice over its refusal to apply the EU Savings Tax Directive in respect of interest payments made to beneficial owners who benefit from so-called “non-domiciled resident” status in their country of residence.Under Luxembourg legislation, beneficial owners are considered to benefit from the “non-domiciled” status, if they are generally exempt from income tax in their state of residence for tax purposes or if the interest payments, provided they are not remitted to the state of residence, are not subject to tax in that state. According to the Commission, Luxembourg cannot provide for an exemption from withholding tax in situations other than those expressly provided by article 13 of the Directive ? either the so-called “voluntary disclosure” procedure, which allows the beneficial owner expressly to authorise the paying agent to report information to the tax authorities of his state of residence, or the “certificate procedure” which ensures that withholding tax is not levied when the beneficial owner presents to his paying agent a certificate from his member state of residence for tax purposes.In the Commission?s opinion, the paying agent has an obligation to establish the residence of the beneficial owner on the basis of minimum standards and, if they are a resident of another member state, the member state of the paying agent must ensure that the latter applies the Directive and, in the case of Luxembourg, that the paying agent levies a withholding tax on interest payments to such a beneficial owner.The Commission therefore considered that Luxembourg’s legislation, in its current state, is not compatible with articles 2, 3, 10 and 11 of the Directive. Given that it was not amended following the reasoned opinion sent by the Commission in November 2008, the Commission decided to refer the case to the European Court of Justice.
25 June, the European Commission requested that Belgium amend legislation that leads to different taxation of interest depending on where the bank paying such interest is established. Interest paid by Belgian banks to individuals is currently exempted from tax up to the amount of €1,660, whereas interest paid by foreign banks cannot benefit from the same exemption. Belgian residents are therefore dissuaded from opening or maintaining savings accounts with banks that are not established in Belgium. In the Commission’s opinion, the difference in treatment amounts to an obstacle to the free movement of capital and constitutes an arbitrary discrimination that cannot be justified. The Commission’s request is in the form of a ?reasoned opinion?, the second step of the infringement procedure of Article 226 of the EC Treaty. If Belgium does not respond satisfactorily within two months, the Commission may refer the matter to the European Court of Justice.
30 April, an order made under the Hong Kong Inland Revenue Ordinance to implement the tax treaty signed with the Socialist Republic of Vietnam on 16 December 2008 was gazetted.Under the agreement, double taxation is avoided in that any Hong Kong income tax paid by Vietnam residents or companies shall be allowed as a credit against any tax payable in respect of the same incomes in Vietnam. The withholding tax on royalties derived in Vietnam will be capped at 7% where payments are made for the use of patent, design or model, plan, secret formula or process.The agreement will only take effect after both sides have completed their ratification procedures. The treaty is the fifth comprehensive double taxation agreement (CDTA) signed by Hong Kong, following those with Belgium, Thailand, the mainland of China and Luxembourg.
27 April, the Indonesian revenue was reported to have requested permission from the Ministry of Foreign Affairs to post tax officials in tax havens and other countries in which Indonesia has significant economic interests. These include the Cayman Islands, the British Virgin Islands, Bermuda, Switzerland, Mauritius and the Seychelles.Director General of Taxation Darmin Nasution said tax officials needed to be on the ground abroad because they could not rely on other institutions that did not have the expertise or the time and resources to conduct adequate investigations. Darmin said the revenue also wanted to place tax officials in some jurisdictions that have significant links to Indonesia’s economic activities “even if they are not tax havens. China and Singapore, for example?.
7 April, the Irish government announced a large rise in taxes and a cut in spending in an emergency budget to deal with its rapidly contracting economy. The European Commission has given Ireland until 2013 to rein in its deficit to the allowable level of 3% of GDP. Capital gains tax and capital acquisitions tax were raised to 25%, but the low 12.5% corporate tax rate ? a key driver for economic growth in Ireland ? was retained. Income levies, introduced last autumn, were doubled, and the thresholds they apply were lowered.
1 September, the Irish Revenue commenced an investigation into the use of trusts and offshore structures, which will focus on identifying undeclared tax liabilities by persons who have transferred or settled property, assets or funds to trusts or offshore structures. It will examine the tax returns and reporting compliance requirements of the individual transferors and settlors and will cover all historic years for which there are undeclared tax liabilities. The legislative powers contained in the Taxes Acts will be used in seeking from taxpayers, financial institutions and other third parties, the production of documentation, information and particulars that are relevant to the tax liabilities of the settlors and transferors of the assets and funds. The automatic reporting of information under the EU Taxation Of Savings Directive and exchange of information under Tax Information Exchange Agreements will also be used. Persons with undeclared tax liabilities had an opportunity to make a qualifying disclosure to Revenue. Taxpayers had until 1 September 2009 to deliver a notice of intention to make a qualifying disclosure to Revenue. The deadline for making the follow-up disclosure and payment is 31 October 2009.
21 April, the US Internal Revenue Service announced a new service-wide approach to tax administration to deal more effectively with the increase of globalisation of individual and business taxpayers. Its priority will be to improve voluntary compliance with the international tax provisions and reduce the ?tax gap? attributable to international transactions by placing a higher emphasis on compliance, information reporting and cooperation with tax treaty partners.?As globalisation continues to grow, tax planning is increasingly focused on minimising the worldwide effective tax rate. In this context, international/US territory non-compliance is a significant area of concern and focus,? the agency stated. ?We are challenged by a lack of information reporting on many cross-border transactions. The ease of utilising complex international structures and cross-border transactions results in constantly evolving compliance issues. We will proactively enforce international tax law by expanding our approaches and tools, using a data driven approach to target new and emerging issues, expand workforce skills on international issues, and ensure adherence to professional standards by tax professionals.?The new approach will include initiatives to: strengthen information reporting and withholding systems to ensure receipt of the appropriate information; identify emerging compliance issues and increase issue specialisation to address complex transactions; leverage partnerships with other government organisations to gather and share information that will assist in tax administration and compliance efforts; improve cooperation with treaty partners and the international community to address inappropriate tax arbitrage and abusive schemes, achieve greater transparency on cross border transactions, and implement process improvements in the mutual agreement programme; and detect and deter financial criminal activity and abusive transactions that involve offshore entities and cross border transactions.But IRS Commissioner Doug Shulman said the strategy would go hand-in-hand with a tougher programme of compliance in the international tax sphere. According to Shulman, multinational enterprises increased from 3,000 in 1990 to more than 63,000 in 2007. Over the period form 2000 to 2007, the value of foreign tax credits claimed by corporations increased by more than 70%.
21 September, the IRS announced that it had extended the deadline ? from 23 September to 15 October ? for US taxpayers with previously undisclosed offshore accounts to come forward and participate in the Offshore Settlement Initiative Programme. It warned there would be no further extensions.The IRS said that tax practitioners had requested an extension because they were having trouble interviewing and advising the large number clients who had come to them for help. The extension is designed to help taxpayers who ?had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it,? according to the IRS.The voluntary disclosure programme was announced in March. Taxpayers not already under investigation by the IRS can cap their liability at six years of back taxes, interest and penalties, as well as avoid possible criminal prosecution. The IRS said: ?Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties, where applicable, and possible criminal prosecution.?More than 3,000 people have come forward so far, compared with fewer than 100 in 2008. There was a surge after the Swiss government agreed in August that the IRS would gain access to 4,450 US clients with offshore UBS accounts. As part of the agreement, the bank last week started informing account holders by post that their information could be released to the IRS.
24 June, the Isle of Man government announced its intention to move fully to automatic exchange of information in its application of the European Union Savings Directive from 1 July 2011. At this time the existing withholding tax option available to customers having accounts with Isle of Man banks as part of a transitional arrangement will be withdrawn. Since the Directive entered into force in July 2005, most EU countries automatically report the savings accounts of EU residents to their home government. But Austria, Belgium and Luxembourg negotiated an opt-out to enable them to maintain bank secrecy. Instead of exchanging information, they imposed a withholding tax, called a ?retention tax?, on certain types of payment, principally interest, made to residents of an EU country. Third-countries including Switzerland, Liechtenstein, Monaco, San Marino and Andorra, as well as the UK Crown Dependencies, agreed to do the same.It was always the intention of the EU that the option to withhold tax on interest paid to EU savers instead of the exchanging of information on account holders’ interest, would only be available to jurisdictions during a transitional phase. The Isle of Man is the first jurisdiction to make the transition. Since 2000, the Isle of Man has signed 14 tax information exchange agreements and one double taxation agreement. The island was placed on the OECD’s white list of compliant jurisdictions after the G20 summit in London in April.Chief Minister Allan Bell said, ?Our decision today to move to automatic exchange of information under the EU Savings Directive is a clear sign that we intend to continue to lead the way in international tax co-operation and transparency. This is a signal to our trading partners and investors alike that we can continue to be relied upon and that our name is associated with probity and foresight.?
15 July, the Italian government proposed its third tax amnesty in nine years in order to boost government revenue by repatriating billions of euros held by Italians in banks abroad. It will be offered on capital undisclosed until 31 December last year and will apply from 15 October to 15 April 2010. Under the amnesty plan, Italy will impose a 50% tax on interest earned on the repatriated funds, assumed to be 2% annually over the past five years.It is estimated that Italians have about €600 billion lodged in foreign tax havens and bankers have said the amount involved this time could be more than the previous two amnesties that together repatriated €80 billion. Italy’s previous amnesty scheme was conducted in two phases and involved paying a one-off tax first set at 4%, then 2.5%.
17 July, the Foundations (Jersey) Law 2009 was brought into force having been approved by the Privy Council in June. The move makes it the first UK Crown Dependency to provide for foundations, which are more familiar to residents of civil law jurisdictions than trusts. Regulations were also lodged with Jersey?s States assembly that will allow foundations to move to Jersey from other countries.The Law will permit the establishment of Jersey foundations which will be incorporated bodies that can hold assets, transact business and sue and be sued in their own name. Whilst similar in design to foundations in other jurisdictions, the Jersey structure has mandatory requirements for one member on its council to be licensed as a Qualified Person by the Jersey Financial Services Commission and for the foundation to have a ?guardian?, who has a duty to supervise the council?s activities.
7 September, the Jersey Financial Services Commission published a Consultation Paper that sets out proposed amendments to the Money Laundering (Jersey) Order 2008, which requires businesses within its scope to apply customer due diligence measures, keep records, and have policies and procedures in place to prevent and detect money laundering and terrorist financing. Businesses covered include banks, investment businesses, trust companies, lawyers, accountants, and estate agents. The draft Money Laundering (Amendment No. 4) (Jersey) Order is designed to deal with technical points raised in a recent review of Jersey?s framework by the International Monetary Fund.The main effect would be to: clarify the application of customer due diligence measures to trusts and other legal arrangements; require particular attention to be paid to implementing policies and procedures in subsidiaries and branches situated in jurisdictions that do not, or insufficiently, apply the Financial Action Task Force (FATF) Recommendations; restate the requirement that customer information must always be collected before a relationship is established; and amend the scope of some of the concessions that may be used when applying due diligence measures to a customer who is considered to present a low risk.
11 August, Liechtenstein and the UK signed two agreements to provide for the exchange of tax information and implement a five-year tax compliance programme designed to tackle the past and future tax liabilities of UK residents holding investments in the principality. Negotiations began on 1 April following Liechtenstein’s pledge to implement the OECD information exchange standards in tax matters.The memorandum of understanding (MOU) provides for a tax compliance programme that will give UK residents a five-year period to declare unreported assets in Liechtenstein in exchange for reduced penalties. It will also require Liechtenstein financial institutions to ensure that UK clients are reporting their investments to HMRC for the next five years.The disclosure programme, known as the Liechtenstein Disclosure Facility (LDF), will operate from 1 September 2009 to 31 March 2015. It will be similar to the UK?s Offshore Disclosure Facility (ODF) in 2007 and will run in parallel with the New Disclosure Opportunity (NDO) that is scheduled to run from 1 September 2009 to 12 March 2010. The LDF applies to UK residents who held investments in Liechtenstein on or after 1 August 2009. Participants will be required to pay all tax and interest on undeclared offshore income going back 10 years, with penalties will be capped at 10%. Taxpayers have the option of paying back taxes at a flat rate of 40% for each tax year or of calculating the actual liability for each year.Taxpayers already under investigation by HMRC as of 11 August 2009 are not eligible, and the reduced penalties provided under the LDF will not be extended to taxpayers who have been previously contacted by HMRC under the ODF or NDO. “Those who have been evading UK tax on assets held in Liechtenstein banks must now settle with us,” said David Hartnett, HMRC permanent secretary for tax. “There are no alternatives.”Liechtenstein financial intermediaries will be required to verify that all clients subject to UK tax are complying with their UK tax obligations. If the intermediary cannot verify compliance, it must stop providing services to that client. The Liechtenstein government must set up an independent audit procedure to verify that undeclared accounts are closed and must enact the necessary legislation within 12 months of the signing of the MOU, at which time the both governments will enter into substantive negotiations on a comprehensive income tax treaty.Liechtenstein Prime Minister Klaus Tschütscher said: ?The MOU sets out a pragmatic path that includes in a cooperative way all parties involved: clients, financial intermediaries and both governments.”The accompanying TIEA, intended as an adjunct to the MOU provisions, is in line with OECD standards and provides for exchange of information on request and in specific cases. The TIEA will enter into force when both governments have completed the necessary legislative procedures.
23 July, Monaco adopted a new law on money laundering as part of a drive to bring its financial sector into line with international standards. It follows a series of recommendations made by the inter-governmental Financial Action Task Force (FATF) and the Council of Europe’s anti-laundering body, MONEYVAL. Finance Minister Sophie Thevenoux said the law pulls together under a single set of rules the steps taken over the years to tackle money laundering.Under the new rules, insurers, accountants, notarial firms, high-end traders and lawyers helping with property or financial transactions will all be asked to carry out checks on their clients. The law also introduces a new €30,000 cap on cash payments, and increases the powers of the Principality?s financial investigator, SICCFIN, to monitor casinos and financial organisations.
5 April, Dutch State Secretary for Finance Jan Kees De Jager announced an intention to increase the penalty for taxpayers who hide money in foreign bank accounts from 100% to at least 300%. Since 2002, the Netherlands has operated an amnesty for people with undeclared accounts. If they disclose assets hidden abroad they must pay an extra tax surcharge, but there is no fine and they will not face criminal prosecution.But the number of taxpayers in the Netherlands taking advantage of the voluntary disclosure programme has increased significantly since countries such as Switzerland, Luxembourg, and Liechtenstein announced they would relax their bank secrecy laws. In the last week of March alone, according to the release, 120 taxpayers made voluntary disclosure accounting for €70 million in revenue.
18 August, the OECD appointed Douglas Shulman, Commissioner of the US Internal Revenue Service (IRS), as the new chair of its Forum on Tax Administration. He replaced Pravin Gordhan who was recently appointed Minister for Finance in South Africa.The Forum comprises tax commissioners from 41 advanced economies and is designed to develop new ideas to enhance tax administration around the world. The Forum also publishes good practices in its participating countries on a wide range of tax compliance and taxpayer services issues and in recent years, commissioned a series of reports focusing on the compliance of large business and very wealthy taxpayers.
23 June, OECD finance ministers, meeting in Berlin, agreed on the need for sanctions to drive uncooperative jurisdictions in the fight against offshore tax evasion to follow through with their pledges. The summit, co-hosted by Germany and France, reviewed the degree to which jurisdictions have taken steps to adhere to the OECD’s standards for transparency in taxation information exchange and to consider the next steps.Ministers from 19 countries welcomed recent endorsements of the OECD standard on exchange of information by many significant financial centres, including four OECD member countries. They further noted that, since their last meeting in Paris last October, all 84 jurisdictions covered by the OECD’s Global Forum on Taxation assessment had committed to the standard.In a statement, they expressed the wish for the OECD Global Forum to be tasked with developing a more precise monitoring, including the corresponding procedures, of the standards of transparency and exchange of information in tax matters that should be based on peer review and rating, to encourage greater conformity of implementation.They said jurisdictions that had committed to the latest OECD standards should be reminded that a refusal to conclude agreements or protocols with OECD member countries would be considered as a lack of willingness to fully implement their commitment. Defensive measures should be applied to prevent undue delays, which could include: increased withholding taxes in respect of a wide variety of payments made to non-cooperative jurisdictions; denial of deductions in respect of expense payments to payees resident in a non-cooperative jurisdiction; and termination of treaties with countries and territories that refuse effective exchange of information.They would also consider co-ordinated action as regards some of the measures aiming at protecting their tax base against those countries and territories that are not implementing the OECD standards effectively, such as: increased disclosure requirements for transactions involving non-cooperative jurisdictions; denial of the participation exemption; and asking international financial institutions to review their investment policy with respect to non-cooperative jurisdictions.The statement also noted the importance of the availability of information regarding beneficial owners of bank accounts, investment vehicles and other financial assets for taxation purposes. It urged the OECD, the FATF and the EU to explore ways to facilitate access to information in relation to trusts, foundations, shell corporations and other arrangements that may be used for tax evasion purposes.
2 July, the UK Court of Appeal held that judges exercising their discretion in achieving fairness between the parties in divorce proceedings were able to take into account the terms of any prenuptial agreement. Pre-nups have previously been unenforceable under English law, but the judges considered that this premise is now ?unrealistic? and does not ?sufficiently recognise the rights of autonomous adults to govern their future financial relationship by agreement, in an age when divorce [is] statistically commonplace?.In Radmacher (formerly Granatino) v Granatino, Katrin Radmacher, one of Germany?s richest women, was successful in asking the Court of Appeal to take into account the pre-nup signed by her and her former husband, a French national, Nicolas Granatino, when dividing up their assets and income on divorce. The agreement provided that on divorce neither would have any claim on the property or income of the other.The couple married in England in 1998 and spent most of their married life there. Radmacher, 39, estimated to be worth £100 million, is the heir to her father?s paper business. Granatino, 37, was a banker when he met Radmacher and was earning well in his own right. Radmacher argued that her former husband was also an heir to a family fortune of up to £20 million. During the marriage he decided to return to academic study. When the marriage broke down in 2006, Granatino argued that the pre-nup should be disregarded in its entirety.A judge in the Family Division ordered Radmacher on 28 July 2008, to pay the husband a total of £5.6 million. The judge found that at the time of the formation and execution of the prenuptial agreement: the husband received no independent legal advice; the agreement deprived the husband of all claims to the furthest permissible legal extent, even in a situation of want and that was manifestly unfair; there was no disclosure by the wife; there were no negotiations; and two children had been born during the marriage.In assessing the husband?s needs, the judge found that she would take account of all of the circumstances of the case, and that, while from an English perspective the prenuptial agreement was flawed, the husband had understood the underlying premise that he was not entitled to anything if the parties divorced, and so his decision to enter the agreement must therefore affect the award.The Court of Appeal decided that the existence of the pre-nup was a ?decisive factor?. Despite the judge in the Family Division giving the appearance of considering the pre-nup agreement as a factor, the overall impression was of a negligible resulting discount. Her discretion had been exercised sufficiently erroneously for some or all of the order to be set aside.It therefore reduced Granatino?s financial award to £1 million as a lump sum instead of maintenance. It also considered that a fund of £2.5 million for a house should be returned to Radmacher when the younger of their two daughters, who is six, reaches the age of 22.
22 June, the Advisory Council approved government plans to cut the corporate tax rate for foreign companies doing business in Qatar from 35% to 10% and to fully exempt domestic companies and those in other Gulf Cooperation Council (GCC) member countries.The move is designed to attract foreign investment and help Qatar to diversify its economy and expand its tax base. More than 60% of Qatar?s GDP is currently derived from oil and gas exports. The other GCC member countries are Saudi Arabia, Bahrain, Kuwait, Oman, and the United Arab Emirates.
21 September, an administrative court judge in Ticino issued a temporary restraining order in the case of two UBS clients in Lugano, ruling that clients of the bank must be informed before their names are turned over to the IRS, and they must be allowed the right to appeal.The IRS is expected to ask for information on the accounts of some 4,500 clients of the bank within a year, part of the negotiations in which the two countries have been involved in recent months. UBS issued a statement saying that it plans to comply with the judge?s order, ?UBS will notify clients who the bank concludes will be affected by administrative assistance,? it said.
19 June, Switzerland and the US concluded negotiations for a new tax information exchange and double taxation treaty. In March, Switzerland agreed, under pressure from the G-20 countries, to permit tax information to be exchanged in response to specific and justified requests under an OECD-model tax information exchange agreement (TIEA). Specifics of the US agreement were not released, and the details will be kept confidential until signed at ministerial level.The move was a key step in Switzerland’s plan to sign at least 12 tax information exchange agreements (TIEAs) by the end of 2009, a target that will enable it to apply to the OECD for removal from the ?grey list? of jurisdictions that are deemed not to have implemented their commitment to international tax cooperation standards.
19 August, an agreement between the Swiss and US governments over Swiss bank UBS was signed in Washington and entered into force immediately. The US is to submit a new treaty request to Switzerland and withdraw the ?John Doe? summons that demanded disclosure of the identity of 52,000 UBS account holders. It also undertook not to seek any further enforcement of the summons. In return, Switzerland undertook to process the new treaty request, concerning about 4,450 accounts, within one year. The new treaty request to the Swiss Federal Tax Administration (SFTA) will draw on certain criteria in a framework for action that allows cases of “tax fraud and the like” to be identified in the case of UBS within the confines of applicable Swiss law and judicial practice. Some 4,450 accounts fall within this framework. The precise criteria are laid down in an annex to the agreement which, at the request of the US, will not be published until 90 days after the agreement has entered into force to ensure the IRS voluntary disclosure programme runs smoothly. According to the existing tax treaty, the term “tax fraud or the like” includes information with regard to serious tax offences, specifically the continued evasion of large sums of tax. Under applicable law and the latest practice of the Swiss Federal Administrative Court, in dealings with the US account information may also be released ? through treaty request channels ? even if the IRS does not yet know the name of the bank client concerned when it submits its request. The SFTA is to set up a project team to accelerate handling of the new treaty request. Under the terms of the agreement, the SFTA must issue final decisions on the first 500 cases within 90 days of the request being received. It has 360 days in total to make a final decision on whether the requested information may be issued in each of the 4,450 cases. UBS must make the account information covered by the treaty request available and prepare it for processing by the SFTA. This is the subject of a separate agreement between UBS and the IRS. The privacy of all of the persons concerned remains protected under the law, and they may contest the SFTA’s final decisions before the Federal Administrative Court. If the actual results of the programme fall significantly short of its targets after 370 days, both parties may take proportionate rebalancing measures to restore an equitable distribution of rights and obligations under the agreement. The civil case in the US will remain pending to prevent any future claims expiring under tax law. It will be finally and completely withdrawn in stages no later than 370 days from the date the agreement was signed. Under a previous agreement, UBS settled criminal charges that it had facilitated tax fraud by paying $780 million and handing over data on about 250 US clients. Prosecutions are underway. Criminal charges arising from that case, and the disclosure of further names from the latest deal are keeping pressure on suspected offenders to report themselves voluntarily.
22 April, the UK Budget contained new anti-avoidance measures, the announcement of a second Offshore Disclosure Facility for the third quarter of 2009, the introduction of a new top income tax rate and details of the new foreign profit taxation measures.The biggest change to personal income taxes was the introduction of a third tax rate, to be levied at 50% on income over £150,000. The new rate will take effect in April 2010. There are currently two personal income tax rates ? the basic 20% rate, which applies to taxable income up to £37,400, and the higher 40% rate, which applies to taxable income over £37,400. The government had originally said in the November 2008 pre-Budget report that the new tax rate would be 45% and that it would take effect in April 2011. In his Budget speech, Chancellor of the Exchequer Alistair Darling said he decided to increase the new tax rate and implement it a year earlier “to help pay for additional support for people now?.The government said it intended to step up efforts to fight tax evasion and challenge tax avoidance schemes in order to raise £1 billion by closing loopholes over the next three years. Proposed measures include publication of the names of deliberate tax defaulters, new reporting requirements for tax defaulters, new duties on senior accounting officers to ensure that corporate tax returns are accurate, an expansion of the Disclosure of Tax Avoidance Schemes regime, and a new taxation code of practice for the banking sector.The government also announced it will introduce a targeted anti-avoidance rule to stop the use of schemes that seek to exploit the foreign exchange tax matching rules, introduce legislation targeting avoidance schemes involving financial products, clarify the double taxation rules to counter abusive schemes, introduce legislation to stop the abuse of the manufactured overseas dividend rules, and clarify the intangible fixed assets regime rules.The foreign profits reform package took effect this year. From 1 July, foreign dividends received by UK companies were exempt from UK corporate income tax. The exemption is accompanied by a worldwide debt cap on interest, under which finance expenses payable by UK members of a group of companies will be subject to a cap equal to the consolidated gross finance expense of that group. The debt cap rules will apply to finance expenses payable in accounting periods beginning on or after 1 January 2010.
3 September 2009, the UK, France and Germany called on the European Union to press at the G20 summit in Pittsburgh for agreement on countermeasures that could be implemented from March 2010 for jurisdictions that fail to implement international standards for exchange of tax information.In a letter addressed to the Prime Minister of Sweden, the country which currently holds the Presidency of the European Union, Gordon Brown, Angela Merkel and Nicolas Sarkozy also called for European G20 members to reaffirm their resolve to implement economic stimulus plans and to support binding rules for financial institutions that would ensure improved governance, greater transparency and changes to remuneration and bonuses.?Concerning non-cooperative jurisdictions, building on the genuine progress observed, we should agree on a comprehensive list of countermeasures that could be implemented starting in March 2010 for jurisdictions that failed to implement effectively the international standards regarding the exchange of tax information,? said the letter.
21 April, a progress report issued as part of the ongoing review of British offshore financial centres said tax transparency, liability and financial supervision were to be the central themes. Michael Foot said his independent review would also examine crisis management at Britain’s Crown Dependencies and Overseas Territories, particularly the tools they have in place to deal with the “consequences of the failure of a major firm”.The interim report summarised initial discussions with the centres on topics including: financial supervision and transparency; taxation in relation to financial stability, sustainability and future competitiveness; financial crisis management and resolution arrangements; and international cooperation.?Defining and understanding the implications of these mutual dependencies and any related contingent liabilities will be a key theme of my review,? said Foot. He praised the offshore centres? ?willingness to match developing international standards,? with regards to tax transparency and said their regulatory regimes had received favourable reviews from the IMF.Foot said the next stage of the review would involve a wider consultation in respect of the degree of interdependence between the financial centres and the UK; the impact if the prospects of some or all of them were adversely affected; and whether the interrelation between the UK and the regulatory authorities in each financial centre might be changed.
28 July, HM Revenue & Customs announced details of the New Disclosure Opportunity (NDO), which will be the last chance for UK taxpayers to settle unpaid taxes linked to offshore accounts or assets to settle tax liabilities at a favourable penalty rate. Taxpayers who make a complete and accurate disclosure between 1 September 2009 and 12 March 2010 will qualify under the NDO for a 10% penalty. “I know there are people who regret not taking advantage of our Offshore Disclosure Facility (ODF) in 2007 which focused primarily on the customers of five large banks. Now everybody who has not paid the tax they should in relation to offshore accounts or assets has this NDO to pay what they owe with penalties on more favourable terms than normal,? said Dave Hartnett, HMRC Permanent Secretary for Tax. “This will be the last opportunity of its kind.”The penalty rate of 10% will apply to those who were not written to by HMRC under the ODF, which ran from April to November 2007. Those to whom HMRC wrote to in 2007 offering the 10% rate but did not complete the ODF procedure and now want to disclose will have an opportunity to do so with unpaid tax attracting a penalty of 20%. When the NDO disclosure window closes on 12 March 2010, those taxpayers who have not come forward but are found to have unpaid tax liabilities will face penalties of at least 30% rising to 100% of the tax evaded. They also run a risk of criminal prosecution.To use the NDO a notification of the intention to disclose must be made to HMRC between 1 September and 30 November 2009. Disclosures can then be made on paper from 1 September 2009 to 31 January 2010 and electronically from 1 October 2009 to 12 March 2010.