Switzerland and Singapore joined today the growing ranks of countries agreeing to share tax information in a major breakthrough against banking secrecy, the OECD said.
Under the pledge signed by a total 47 countries, financial information will automatically be shared on an annual basis between governments, including taxpayers’ bank balances, dividends, interest income and sales proceeds used to calculate capital gains tax.
“It’s clearly the end of bank secrecy abused for tax purposes,” Pascal Saint-Amans, tax director at the Organisation for Economic Cooperation and Development, told journalists at a meeting held by the international think-tank in Paris.
“It means that governments can really assess the tax owed by people who thought they could hide in other jurisdictions.”
While most of the signatories had already committed to sharing tax information on an automatic basis, the fact that Switzerland and Singapore have now also signed up is a big step in a fight against tax evasion that governments have intensified since the global financial crisis.
Facing mounting pressure to dismantle a cherished culture of banking secrecy, some of Switzerland’s 300-plus private banks had already signalled last year their readiness to work with US officials to crack down on wealthy Americans. Switzerland is still the world’s biggest offshore financial centre with $2 trillion in assets.
But Singapore is breathing down its neck and a 2013 study showed finance professionals see it soon overtaking the Alpine nation amid a global tax crackdown and tighter regulation.
The OECD has devised a common standard to simplify the exchange of financial details, which its 34 members and the 13 other countries agreed to adopt.
Financial companies will also be required to identify the ultimate beneficiaries of shell companies, trusts and similar legal arrangements that at present can be used to evade taxes.
Although the signatories did not officially commit to a specific deadline, a group of early adopters is aiming to have exchange of information up and running by 2017 using tax data collected from the end of 2015. Banks will have a year to adapt their information technology systems while governments will have to modify their tax laws, Mr Saint-Amans said.
Foot-draggers will be spared formal sanctions, but compliance will be monitored through international peer reviews similar to existing arrangements for the exchange of tax information on request.
The shift to an international standard on automatic sharing of information has been accelerated by the US Foreign Account Tax Compliance Act (FATCA) which forces banks outside the United States to give Washington details of foreign accounts held by US citizens.
A US treasury department spokeswoman said yesterday that Singapore had reached a tax information-sharing agreement with the United States, set to take effect on July 1st, under a new law meant to combat offshore tax dodging by Americans. Countries have said that once they agreed to share information with the United States, other large countries pressured them for a similar deal.
Reuters
