Reuters: Regulatory News: Legislators seek British version of US tax disclosure rules

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Legislators seek British version of US tax disclosure rules Aug 23rd 2012, 00:01 By Chris Vellacott LONDON | Wed Aug 22, 2012 8:01pm EDT LONDON Aug 23 (Reuters) - A cross-party committee of British legislators has called on the government to introduce U.S.-style automatic disclosure of information on UK citizens by foreign institutions and tax authorities to help stem global cross-border tax evasion. In a report published on Thursday, the International Development Committee said that if tax authorities are required to share information on UK individual taxpayers or corporations, it would help stop international tax evasion. The proposed legislation takes as inspiration the new U.S. Foreign Account Tax Compliance Act (FATCA), which is designed to stop Americans from hiding money from the taxman offshore, the report says. FATCA places the burden of automatic disclosure to U.S. tax authorities on foreign financial institutions, with U.S. taxpayers as clients. In Europe, under the EU's Savings Directive, if an EU resident holds an account in another member state, the home tax authorities must be notified. The UK parliamentary committee suggested that if the UK required tax authorities to exchange information related to British citizens or corporations with overseas interests, it would establish a standard of transparency. "We recommend that the government introduce legislation similar to the relevant section of the U.S. ... FATCA, requiring tax authorities automatically to exchange information relating to UK citizens or corporations," the report said. The committee also recommended the UK government use its influence "to persuade other governments to follow suit". Such a move could enhance the ability of developing countries to increase their tax take, the report said. "The capacity of a developing country tax authority to obtain information on the offshore activities of its citizens or corporations is critical to its ability to curtail illicit capital flight." FINANCIAL INDUSTRY HEADACHES Adoption of U.S.-style automatic disclosure rules by other developed countries would add to a long list of regulatory headaches currently afflicting the global financial services industry. Rules on enforcing FATCA have yet to be finalised, but they have already caused ripples across the banking industry, which has had to absorb the administrative and financial burden of meeting the disclosure obligations. Another reform mooted by the committee is the introduction of new accounting standards that would require corporations to report information on a country-by-country basis. This would aim to prevent multinationals from shifting profits to subsidiaries set up in tax havens, thus reducing the tax take in the countries where they actually operate. UK charity Christian Aid, which has campaigned for country-by-country reporting and provided written evidence to the Committee, welcomed the proposals. "We're ... really pleased that MPs are calling on the UK government to lead the global fight against tax dodging, rather than waiting for other countries to agree on what to do about it," said Joseph Stead, senior economic justice adviser at Christian Aid. Link this Share this Digg this Email Reprints

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