In December 2016, the OECD announced that the number of relationships in place for the automatic exchange of account information between countries had passed 1300. Of these, 1133 are live – so ready to exchange information in 2017.
These exchange-of-information agreements largely stem from the OECD's Common Reporting Standard (CRS). The rather bland title perhaps belies its significance in terms of tax secrecy and the fight against tax evasion.
In broad terms, what the CRS does is require financial institutions to tell HMRC about accounts held by persons that are tax resident overseas, and then HMRC passes this information to the country where that person is resident. The UK is one of over 50 countries already signed up to participate in 2017. The first submissions by the financial institutions are due to be made to HMRC by the end of May 2017, and the data shared with overseas tax authorities by September 2017. Anyone with an offshore account should be notified that their details, including their address and national insurance number, are being passed on. In return, tax authorities around the world will soon be sharing massive amounts of data with HMRC, who will be using it to check the individuals' UK tax position is right.
Glancing through the list of current participants and active agreements on the OECD website, there are still plenty of countries yet to sign up, although the OECD is confident that 101 territories are committed and will be exchanging information by 2018 at the latest.
The biggest absentee is the US. The US brought in its own Foreign Account Tax Compliance Act (FATCA) rules a few years ago, aimed at US nationals hiding monies offshore. The concept is largely similar to CRS, with financial institutions overseas having to report account information to the US authorities. The main difference between FATCA and CRS is that FATCA was designed to be a one-way street: non-US institutions disclose accounts of US nationals but not necessarily the other way around. CRS, like OECD initiatives generally, has reciprocity at its heart.
The US continues to find it hard to recognise that doing its own thing is antagonistic as far as tax cooperation is concerned. In terms of secrecy, its states' corporate laws provide a level of confidentiality that the rest of the world finds increasingly unpalatable. For those wanting to keep money private, certain US states may still provide an opportunity.
If you would like any more information on this issue please get in touch with Rebecca Reading or your usual RSM contact.