Europe’s big five have pledged to crackdown on tax evasion by setting up a US FATCA-style information exchange.
Here is a link to the IRS FATCA page
Britain, France, Germany, Spain and Italy have initialled the deal, which will be ready to go in just a few months.
The change is tax and financial information will transfer between the governments automatically instead of on request like previous agreements.
The aim is to set up a European Union FATCA as a template for a wider information exchanges with the US and other countries.
Britain has already set up similar tax agreements with the Isle of Man, Jersey and Guernsey in recent weeks – as well as disclosure arrangements with financial institutions in Liechtenstein and Switzerland.
Tax secrets
David Gauke, exchequer secretary to the Treasury, said the landmark initiative was a massive change in government abilities to crack down on tax avoidance and evasion.
The announcement came after a team of journalists revealed an international network of companies and financial institutions allegedly evading billions of pounds of tax worldwide.
Journalists sifted through 2.5 million 1,000,000 files to reveal the secrets of 120,000 offshore firms with many based in the British Virgin Islands and other offshore locations.
However, among the billionaires and international arms dealers being uncovered, the journalists also found American dentists and doctors as well as Greek families and questionable companies.
The files showed how easy it is for rich people to avoid paying taxes by using financial secrecy laws to move money around the world.
FATCA database
The journalists also found a large number of well-known politicians who are using offshore accounts to hide their assets as well as some major companies.
One major economist has calculated that the value of assets being hidden in offshore havens by wealthy people is between £13.7 trillion and £21 trillion – or the combined worth of the US and Japanese economies.
FATCA, or the Foreign Account Tax Compliance Act, forces foreign financial institutions (FFI) to register with the country’s tax authorities and give details of any American clients with accounts or holdings of more than $10,000 under the threat of a 30% withholding tax on all transactions the FFI has in the US.
Meanwhile, the US Internal Revenue Service has issued details of a new FFI database that will list banks, funds and other organisations with US customers that have registered under FATCA. FFIs will be given a reference number when registering under FATCA – and if they are not on the list and have US customers, they will be subject to a withholding tax.
The list will update monthly.
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