Treasury to crack down on UK's offshore tax havens

Channel Islands and Isle of Man will be among those ordered to reveal names behind hidden accounts

The guardian, The Observer, Jamie Doward, Saturday 24 November 2012

The Cayman Islands: will they really come clean about their tax practices?
Photograph: Martin Barraud/Getty Images

Radical plans to force the UK's tax havens to reveal the names behind hidden companies, account holders and trusts have been drawn up by the Treasury.

The news has delighted tax justice campaigners, who predict that the move, which is expected to be unveiled in the chancellor's autumn statement and come into force in 2014, will have major consequences for those trying to hide their money offshore.

A leaked document reveals that the UK plans to impose its own version of the US Foreign Account Tax Compliance Act (Fatca) on the crown dependencies of Jersey, Guernsey and the Isle of Man, as well as its overseas territories, such as the Cayman Islands.

Fatca, which will come into force in the middle of next year, requires foreign banks to report American account holders to the US Inland Revenue Service. The draft UK equivalent, seen by the magazine International Tax Review, will require British tax havens to make similar disclosures about UK account holders to UK tax authorities.

"It's a complete bombshell for these places," Richard Murphy, a tax expert who has seen the draft plan, told the Observer. "Some people will try to flee, but this is going to change the whole of the offshore market."

He explained that the draft plan amounted to the UK using US legislation to give tax havens an ultimatum: "It's either they give the UK the same data that they want to give the US or the UK won't pass their laws to let data flow to the US."

The ultimatum is crucial, Murphy suggested. If the UK refuses to pass the laws, its tax havens "might just as well shut up shop since there would be almost no banks or other institutions willing to locate there".

News of the plans is likely to surprise many tax experts. This month, responding to an international development committee report, the government publicly rejected the need for a UK version of Fatca.

Joseph Stead, Christian Aid's senior adviser on economic justice, said that if the draft was implemented it "would be the beginning of the end for tax haven secrecy".

However, he said it was vital that it should not just be the UK which obtains full information disclosure from its tax havens: "We should ensure that other countries get it too, so they can catch up with people and companies hiding money. Otherwise there will be tax haven secrecy for some countries and not others.

"Poor countries lose billions every year to tax dodging and tax havens are often involved. We hope the UK government will use the G8 meeting it is hosting next year to agree action to ensure a global end to tax haven secrecy."

The Treasury declined to comment but confirmed to the Review that it was assisting the UK's crown dependencies and overseas territories to produce their response to Fatca.

However, former Liberal Democrat Treasury spokesman Lord Oakeshott was sceptical about whether the plan could succeed. "Tax havens really coming clean are as likely as a snowy Christmas day in the Cayman Islands," he said.

Last night the Labour shadow chancellor, Ed Balls, outlined a five-point plan for tackling tax avoidance. In an article for the Huffington Post, Balls writes: "We urgently need to look at how UK tax laws can be made stronger so as to properly deter tax avoidance."

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