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UK under pressure from EU states over beneficial ownership secrecy UK and European allies plan to deal ‘hammer blow’ to tax evasion
(about 3 hours later)
Britain is reported to be resisting pressure from fellow European countries to make the ownership of trusts and foundations fully transparent in the wake of the Panama Papers revelations. Britain and its European allies have announced new “hammer blow” rules against tax evasion in direct response to the Panama Papers leak that exposed how the world’s richest and most powerful people hide their wealth from the taxman.
At a G20 meeting in Washington, finance ministers from France, Italy, Spain and Germany are understood to have advocated that countries should make it harder for wealthy individuals to hide behind trusts in order to shelter assets from tax authorities. George Osborne announced on Thursday, in partnership with his counterparts from France, Germany, Spain and Italy, new rules that will lead to the automatic sharing of information about the true owners of complex shell companies and overseas trusts.
The chancellor said the new rules, which were agreed this week in direct response to the Panama Papers leak, were “a hammer blow against those that would illegally evade taxes and hide their wealth in the dark corners of the financial system.
“Britain will work with our major European partners to find out who really owns the secretive shell companies and trusts that have been used as conduits for evading tax, laundering money and benefiting from corruption,” Osborne said at the spring meetings of the International Monetary Fund in Washington.
“Strong words of condemnation are not enough, populist outrage doesn’t by itself collect a single extra pound or dollar in tax or put a single criminal in jail,” Osborne said. “What we need is international action now, and that’s precisely what we are doing today with real concrete action in the war against tax evasion.”
He said the transparency rules on beneficial ownership showed that Britain and other governments are working to shine a spotlight on “those hiding spaces, those dark corners of the global financial system”. He said he hoped the rules, which will come into effect in January 2017, would be followed up by other countries.
Ángel Gurría, the secretary general of the Organisation for Economic Co-operation and Development, said the release of the Panama Papers showed that there was no room for complacency in the international effort to crack down on tax evasion. He said it was no surprise that the rich and the powerful were using Panama to evade tax as “it is one of the few jurisdictions that has pushed against” international measures to improve tax and ownership transparency.
“We have to crack down on the professional enablers – lawyers, accountants, financial institutions – that play a key role in maintaining the veil of secrecy,” he said.
However, it has been reported that finance ministers of the other European countries had pushed Britain to extend the new rules to all trusts rather than just those that “generate tax consequences”. Tax transparency campaigners believe this is likely to exclude many trusts, which are deliberately constructed to avoid such consequences.
Britain has repeatedly played down concerns over tax evasion and other wrongdoing involving trusts. While they are a common feature of UK law, they are less familiar in mainland Europe and viewed with suspicion by many tax transparency campaigners. Bloomberg reported that UK officials had made clear Britain would continue to resist pressure for reform, which is led by France.Britain has repeatedly played down concerns over tax evasion and other wrongdoing involving trusts. While they are a common feature of UK law, they are less familiar in mainland Europe and viewed with suspicion by many tax transparency campaigners. Bloomberg reported that UK officials had made clear Britain would continue to resist pressure for reform, which is led by France.
George Osborne also faced pressure in Washington because many world leaders hold Britain responsible for its overseas territories, several of which aggressively market corporate secrecy to wealthy companies and individuals around the world. A spokesman for Osborne said there was no rift between the UK and France or any of its other European partners.
Tensions over trusts and foundations were papered over on Thursday evening, however when five European member states – Germany, France, Spain, Italy and Britain – published a joint letter announcing further steps on financial transparency. The chancellor also faced pressure in Washington because many world leaders hold Britain responsible for its overseas territories, several of which aggressively market corporate secrecy to wealthy companies and individuals around the world.
The five countries unveiled a pilot initiative to share information on beneficial ownership that they said would help the authorities track complex trails used by criminals. Britain is already committed to a public register of beneficial ownership while many other countries are introducing registers that will be confidential. Tensions over trusts and foundations were papered over, however, when Germany, France, Spain, Italy and Britain published a joint letter announcing further steps on financial transparency.
Britain is already committed to a public register of beneficial ownership while many other countries are introducing registers that will be confidential.
“We will look to ensure that this information is in a fully searchable format and that it also contains information on entities and arrangements closed during the relevant year,” the letter said.“We will look to ensure that this information is in a fully searchable format and that it also contains information on entities and arrangements closed during the relevant year,” the letter said.
The letter was not signed by other G20 countries, including the US, which has consistently resisted calls for public registers of beneficial ownership. The US feels such measures could harm states such as Delaware, well known for providing corporate secrecy.The letter was not signed by other G20 countries, including the US, which has consistently resisted calls for public registers of beneficial ownership. The US feels such measures could harm states such as Delaware, well known for providing corporate secrecy.
The European finance ministers’ letter is also not thought to be supported by Russia and China – both of which featured prominently in Panama Papers revelations.The European finance ministers’ letter is also not thought to be supported by Russia and China – both of which featured prominently in Panama Papers revelations.
Addressed to fellow G20 countries, the letter said: “In our view, this new initiative will take a significant step forward in improving the transparency of beneficial ownership information and in removing the veil of secrecy under which criminals operate. Addressed to fellow G20 countries, the letter says: “In our view, this new initiative will take a significant step forward in improving the transparency of beneficial ownership information and in removing the veil of secrecy under which criminals operate.
“The recent extensive leaks from Panama show the critical importance of the fight against tax evasion, aggressive tax planning and money laundering… Criminals continue to find ways to exploit the cracks in the current system, setting up complex structures in various and often multiple locations to hide their activities… As with tax evasion, this requires a global response.” “The recent extensive leaks from Panama show the critical importance of the fight against tax evasion, aggressive tax planning and money laundering … Criminals continue to find ways to exploit the cracks in the current system, setting up complex structures in various and often multiple locations to hide their activities … As with tax evasion, this requires a global response.”
In a separate letter, OECD secretary general Angel Gurría noted that several countries had still not properly implemented the promised information-sharing arrangements for tax inspectors. In a separate letter, Gurría noted that several countries had still not properly implemented the promised information-sharing arrangements for tax inspectors.
“Our standards on tax transparency are robust,” he said. “They need to be effectively implemented worldwide, by everyone, with no exceptions, so there’s nowhere left to hide.” Among the countries yet to implement information-sharing arrangements were Panama and Bahrain.“Our standards on tax transparency are robust,” he said. “They need to be effectively implemented worldwide, by everyone, with no exceptions, so there’s nowhere left to hide.” Among the countries yet to implement information-sharing arrangements were Panama and Bahrain.
French finance minister Michel Sapin said on Wednesday: “[The Panama Papers have] breathed new life into the tax evasion crackdown, they have accelerated the process. What has become clear is that we need complete cross-border transparency and international tools to deal with the problem.” The French finance minister, Michel Sapin, said on Wednesday: “[The Panama Papers have] breathed new life into the tax evasion crackdown, they have accelerated the process. What has become clear is that we need complete cross-border transparency and international tools to deal with the problem.”
Osborne said: “Britain will work with our major European partners ‎to find out who really owns the secretive shell companies and trusts that have been used as conduits for evading tax, laundering money and benefiting ‎from corruption.”
He insisted transparency on who holds beneficial ownership of trusts would be included in the new co-ordinated approach. However, it is understood this refers only to those trusts deemed to “generate tax consequences”. Tax transparency campaigners believe this is likely to exclude many trusts, which are deliberately constructed to avoid such consequences.