Responding to an International Development Committee report earlier this week, the government publicly rejected the need for a UK version of FATCA, which would require tax authorities to automatically exchange information relating to UK citizens or corporations.
In private, however, the government has already drafted FATCA legislation which it will impose on its Crown Dependencies and Overseas Territories. These include some of the world’s most notorious tax havens such as the Cayman Islands, the Channel Islands and the Isle of Man.
The draft agreement, seen by International Tax Review, will require the automatic exchange of information for each reportable account of each reporting financial institution. That will include full details of all beneficial owners of the account, including those whose identities might otherwise be hidden by trusts or companies
It will also require the account number, name and identifying number of the reporting financial institution as provided when registering with the IRS for FATCA purposes, and the account balance or value as of the end of the relevant calendar year or other appropriate reporting period or, if the account was closed during such year, immediately before closure.
The move will come as a huge blow to tax havens and companies and individuals hiding money in them. But it is a coup for the Tax Justice Network (TJN), which has long been arguing for automatic information exchange.
“This is a requirement for full, open disclosure,” said the TJN’s Richard Murphy. “It looks through trusts, companies, who owns the assets. It’s full automatic information exchange.”
Murphy says the UK Crown Dependencies and Overseas Territories will never be the same again and he has a simple piece of advice for anyone hiding money in these locations.
“The evidence is now clear: the writing is on the wall for secrecy in the UK's tax havens,” he said. “There are now two options for those hiding their funds in these locations. The first is to own up now. That’s the wise option. It’s the only safe option. The alternative is to flee. My suspicion is that it’s already too late for that to work.”
Murphy says he understands that Jersey is strongly opposed to the legislation, but Guernsey and the Isle of Man are likely to “roll over and take it”.
Malcolm Couch, head of the income tax division at the Isle of Man Treasury would not comment on the prospect of a UK FATCA, but said that the Isle of Man has noticed that discussions on international tax cooperation have moved to a new place as it has become clear that FATCA will work.
“Discussions on automatic exchange of information have come to the fore,” Couch said. “The Isle of Man needs to determine its position appropriately as things move, but they are moving.”
The UK Treasury declined to comment, but said that it is assisting the Crown Dependancies and Overseas Territories in their response to FATCA.
International Tax Review expects an autumn announcement from the government, with the legislation coming into effect on January 1 2014.
© 2021 Euromoney Institutional Investor PLC. For help please see our FAQ.