Tax transparency and the era of automatic information exchange.
Tax transparency is one of the 'hot topics' of the moment. The tax policy of large corporates has come under increasing scrutiny from a public and media that demand companies pay 'their fair share'. Individuals have been pilloried in the press for the way their tax affairs have been structured.
Much of the debate has been ill-informed but whether or not the tax technical matters debated are properly understood is arguably irrelevant. What really matters is the environment generated by the debate and how politicians react to it. And clearly tax advisers need to be wary of the wider mood. Des Hudson, former chief executive of the Law Society and current chairman of the Taxation Disciplinary Board recently stated that there's a disconnect between the tax profession and what society demands on tax behaviour.
One of the enduring legacies of the age of austerity will be a flurry of initiatives focused on ensuring companies and individuals pay the 'right' amount of tax in the 'right' jurisdiction. As a result of these initiatives - BEPs, FATCA, CRS, the 4th EU AML, DAC - banking secrecy and financial privacy will become a thing of the past.
Of the above acronyms, the tax dispute resolution (TDR) team is focused specifically on the impact of the OECD's common reporting standard (CRS). So far, 61 countries, including all major, global financial centres, have signed the multilateral competent authority agreement needed to give effect to the CRS. Many others have also indicated their intention to implement the CRS.
Under the CRS, financial institutions will have an obligation to identify reportable accounts and collate financial and other information about the account holders. This information will be exchanged automatically by taxation authorities on an annual basis. The aim is for the CRS to take effect from 1 January 2016, with the first exchanges of information to take place in September 2017.
The definition of 'financial institution' includes banks, trusts, trust companies and...