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19th Apr 2019

EU commission hopes global standard will end tax evasion

The European Commission is hoping that a new global reporting standard will eradicate tax evasion and tax fraud in the wake of the latest revelations in Switzerland.

“We are hoping that the coming into force of this new agreement at the very latest by 2018 will put an end to tax evasion and fraud by the use of secret bank accounts,” European commission spokesperson Vanessa Mock told reporters in Brussels on Monday (9 February).

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  • EU commission: 'These revelations confirm that banking secrecy has been used to avoid paying taxation' (Photo: George Rex)

The EU and Switzerland negotiated an agreement on the taxation of savings back in 2014.

The plan is to unravel the Swiss tradition of banking secrecy with the Swiss authorities only sharing information about hosted offshore accounts if they receive an official request from foreign tax authorities.

The agreement is now being updated to include a new global standard put in place by the finance ministers from the G20 of industrial nations and the Paris-based OECD.

The annual exchange is set to include balances, interest, dividends, and sales proceeds from financial assets, among other details.

“Switzerland has committed to have its bank supply this information by 2017 and view to international reporting by September 2018,” said Mock.

The statement follows media reports of confidential files that show how a Swiss subsidiary of the British banking giant HSBC helped clients avoid paying millions in taxes by hiding their money in secret Swiss accounts.

The affair is the second big tax avoidance scandal following last November’s revelation about how multi-national corporations were rerouting profits away from national coffers via complex tax rulings in Luxembourg with the tacit approval from the Duchy’s ministry of finance.

Many of those rulings in Luxembourg were made while EU commission president Jean-Claude Juncker was the country’s finance and prime minister.

With the spotlight often on Juncker following the revelations, the commission has been keen to highlight its tax-fighting measures, noting that in 2012 some 30 such measures were proposed.

“Many of the measures that were announced at that time, now approved, aimed to improve transparency and increase exchange of information between tax administrations, so that in other words, tax authorities can collect taxes due by their own tax payers,” she said.

Spontaneous versus automatic

EU-level legislation on tax exchange information has been in the books for the past three decades.

The directive, which was repealed and revised in 2011, says that if the tax rules of one member states result in a loss of tax income in another member state, then member state A has to inform member state B.

The directive notes that mandatory automatic exchange of information without preconditions "is the most effective mean" to crack down on the the evasions.

It provides for a “spontaneous” exchange of information on tax rulings, giving a get-clause for national governments.

Juncker is now pushing for a mandatory automatic exchange of information on advance cross border tax rulings and unilateral advance pricing arrangements, cracking down on the loophole.

The commission plans to publish its proposal before summer.

HSBC offices raided as tax scandal deepens

Swiss prosecutors searched the offices of the Geneva subsidiary of UK banking giant HSBC bank on Wednesday as the inquiry into alleged money-laundering by the bank deepened.

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