Tax Havens (Other than Switzerland) Feeling the Heat From Tax Collectors
Switzerland isn’t the only tax haven feeling the heat from countries that are trying to scrape more revenue by raking in taxes from citizens with undeclared offshore assets.
According to the U.K.-based Ethical Consumer, mini-states, like Andorra and the Cayman Islands, and financial centers, like Hong Kong and Singapore, all offer banking services designed to shelter assets. Austria and Luxembourg, in addition to Switzerland, have been favored destinations in Europe for the wealthy looking to tiptoe around the taxman.
That’s beginning to change. Growing pressure from the U.S. has prompted a sharp increase in the number of countries signing deals to prevent Americans from using offshore banking centers to dodge taxes.
Last month, the U.S. Treasury and the Internal Revenue Service said 19 nations had signed the Foreign Account Tax Compliance Act, a statute that requires foreign financial institutions to provide U.S. authorities with reports on American clients. In the group: Australia, Brazil, South Africa and South Korea, as well as several tax havens, including the British Virgin Islands.
Previously, the U.S. had cut FATCA deals with roughly two dozen nations, including Germany, France and the U.K. as well as several tax haven countries such as the Cayman Islands.
In Europe, Austria and Luxembourg accepted in March a long-delayed European Unionlaw to curtain bank secrecy and tax evasion. That law, which the two had blocked since 2008, requires the EU’s 28 member states to automatically exchange information on accounts held by their citizens abroad.
The Organization for Economic Cooperation and Development has also drawn up proposals for the automatic exchange of tax information, and more than 40 states, including all 34 OECD nations, have a declaration supporting its adoption. Earlier this month, Switzerland signaled its willingness to cooperate in adopting the new standards, which the OECD is expected to finalize in mid-July.