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14th Apr 2024

UK deal on Caribbean tax havens boosts prospect of EU-wide crackdown

British tax havens in the Caribbean have agreed to provide information on offshore bank accounts (2 May), in a step which increases the prospect of an EU-wide agreement on information exchange on overseas accounts used to evade taxation.

Under the regime, the Caribbean islands, which have semi-autonomous status within the UK but which are not part of the EU, will be required to provide London with details on the ownership of bank accounts and how they are used.

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  • Phone box on British Virgin islands: €1 trillion is lost by EU governments to tax evasion each year (Photo: JaguarJulie)

The move should make it easier to prevent people from avoiding tax by moving their money into off-shore accounts.

It also comes just a few weeks after the UK government agreed similar arrangements with the Isle of Man and Jersey and Guernsey in the Channel Islands.

The new deal covers islands including Bermuda, the Cayman Islands, the British Virgin Islands, Anguilla, Montserrat and the Turks and Caicos Islands.

The information will be shared by Britain, Germany, France, Italy and Spain, which agreed in June last year to work together to combat tax evasion.

In a statement, UK chancellor George Osborne said that the agreement was "a significant step forward in tackling illicit finance and sets the global standard in the fight against tax evasion."

"I now hope others follow these governments' lead and enter into similar commitments to this new level of transparency, removing the hiding places for those who seek to evade tax and hide their assets," he added.

Combating tax evasion and avoidance has leapt up the political agenda as cash-strapped governments try to claw back tax revenue.

Tax Research UK, a London-based think tank, has estimated that EU governments lose up to €1 trillion each year to tax evasion, a higher amount than governments spend on healthcare across the 27-country bloc.

Last week, EU taxation commissioner Algirdas Semeta announced the launch of a tax governance platform to monitor national government policies tackling tax evasion and clamping down on tax havens.

He told reporters that the regime was an attempt to "protect the fairness of our tax systems."

Ending bank account secrecy will be the main subject up for discussion at the May European Council summit. EU officials are pressing Austria to drop its veto on EU-wide legislation obliging banks and governments to exchange data on their citizens' bank accounts abroad.

For its part, Austria has accused the UK and the United States of shielding their own tax havens, with finance minister Maria Fekter, describing Britain as "the island of the blessed for tax evasion and money laundering."

Meanwhile, UK Prime Minister David Cameron has already signalled his intention to discuss the issue as chairman of the next meeting of the G8 in June.

The Organisation for Economic Co-operation and Development, a Paris-based think tank, has been asked to report on how global standards on bank information exchange could work.

In a letter sent last week (25 April) to European Council President Herman van Rompuy, Cameron said he was committed to set "multilateral automatic information exchange as a new global standard, and encourage other jurisdictions to publicly commit to joining a multilateral system at the earliest opportunity."

EU seeks quick deal on tax transparency

The EU is hoping to reach agreement on automatic exchange of data on overseas bank accounts, according to a letter sent to national capitals on Wednesday

Analysis

Why is Austria so keen on bank secrecy?

Privacy concerns and the fear of losing big money from abroad are the main reasons why Austria is still holding out against an EU scheme to lift bank secrecy in Europe.

Austria attacks UK, as EU finance talks get ugly

Austria has accused the UK of being a haven for money launderers ahead of an EU meeting in Dublin, with Cyprus, Ireland, Portugal and Slovenia's (potential) bailout needs also on the agenda.

EU targets tax evasion on savings

The EU commission wants to tighten tax loopholes for EU citizens who hold accounts in member states and in Switzerland, Andorra, San Marino, Monaco and Lichtenstein.

Opinion

This 'deregulation' lobbying now threatens EU economy

Next week's EU summit (17-18 April) will discuss the strategic agenda for the next five years. The current "competitiveness agenda" is to a large extent driven by a big lobbying campaign — so far, not well covered by the media.

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