The new information exchange agreement is described as having been based on the model intergovernmental agreement for complying with the US Foreign Account Tax Compliance Act (Fatca) that the five countries agreed to last year with the Americans.
In a statement this afternoon, HM Revenue & Customs noted that the new agreement between the UK, France, Germany, Italy and Spain would “help catch and deter tax evaders as well as providing a template for wider multilateral automatic tax information exchange”.
The terms of the new agreement have been set out in a joint letter that was issued today to the European Commission, the HMRC statement went on. It added: “This will help ensure that international tax evasion is tackled in a way that minimises costs for both businesses and governments.”
Model IGA
The model intergovernmental agreement on which the new agreement is based was unveiled in February, 2012, and sets out the terms under which financial institutions in the five EU countries are to forward the data sought by the US tax authorities on their American account-holders to the governments of the respective countries, which in turn are to forward it to the US.
Fatca was signed into law by President Obama in 2010, and was aimed at cracking down on Americans who make use of foreign bank accounts, trusts and other overseas financial instruments to evade their US taxes. It affects Americans living in the US who maintain overseas accounts, as well as the estimated seven million Americans who live abroad, most of whom are thought to have at least one bank account in the country in which they live.
Most of the reporting obligations for non-US fianancial services organisations come into force next January, after having been pushed back from the original January 2013 start date.
Although FATCA has been enormously controversial ever since the implications of its obligations for non-US financial services institutions began to become apparent, growing numbers of experts have predicted that other countries would look to create similar laws, which has in fact been the case.
Last year France unveiled a "mini-Fatca" scheme, which contained measures that oblige trusts and their trustees to report on the trust’s French assets, their French beneficiaries, and/or French settlors.
This year, the Isle of Man, Guernsey and Jersey have also agreed to a Fatca-like information reporting "package" with the UK.
Treasury minister David Gauke said the new agreement was “an important further step in the fight against tax evasion, and represents the next stage in promoting a new standard in the automatic exchange of tax information”.
“This builds on the agreements we have reached with the Isle of Man, Guernsey and Jersey, and the discussions currently under way with the Overseas Territories.”
HMRC cites G8 role
In its statement announcing the new agreement, HMRC noted that Prime Minister David Cameron had indicated his intention of using the UK’s presidency of the G8 to “explore options for greater levels of tax information exchange, particularly on a multilateral basis”.
For this reason, “the Government therefore sees this agreement as an important early step in a much wider move towards a new international standard in the automatic exchange of tax information, providing a step change in the ability of tax administrations to clamp down on tax evasion,” HMRC said.
