US, UK and Europe Cracking Down on Tax Evasion

Perhaps in an effort to reap tax dividends to help with the global fiscal crisis, governments around the world are cracking down on tax evasion

In what seems like a concerted global push to target tax evasion, the US, UK and Europe have all announced various measures and tactics to target individuals and companies who they believe are flaunting loopholes and flouting laws and subsequently avoiding taxation.

They are not specifically turning their attentions on expatriates living in their nation nor on their expatriates living abroad who often have the means and the right to make the most of tax saving opportunities that become possible once they expatriate, rather they are looking closely at the activities of their resident citizens who are perhaps being less than honest with their accounting.

The Germans are putting pressure on Europe to do more to prevent tax evasion, the US are looking at specific European financial institutions and how they may be assisting Americans to evade tax, and Britain is apparently all set to begin targeting offshore accounts held by up to 25 institutions.  So, do you need to be worried?

Well, if you’re aware that you’re evading tax with your current banking, investing and accounting practices – yes, you do need to be concerned!  But if you believe you’re acting within the law by going offshore, then you probably have little at all to worry about.  If you are at all concerned you should of course speak to a qualified taxation and financial practitioner.  There follows a breakdown of the American, British and European practices and proposals in place currently that may have an impact on those currently offshoring assets.

The UK is continuing its crackdown on Britons who may be exploiting tax accountancy laws and rules by banking and investing offshore and failing to declare the money that they have overseas.  Already HM Revenue and Customs has targeted the offshore accounts held by British taxable residents at 5 high profile banks – they gave these institutions’ account holders something of an amnesty to come forward and state previously undeclared assets and accounts.  Following the amnesty an investigation was launched into the banks’ customers and it’s thought that prosecutions will now follow where wrongdoing has been discovered.  In all, about 400 million pounds worth of unpaid taxes were discovered to be outstanding, according to Bloomberg.

In the latest chapter of events, the Financial Times claims that 25 more institutions, including building societies and also foreign banks that have a UK presence, are being looked at by the Revenue.  If you’re a resident in the UK for tax purposes and you hold any assets offshore, you have a legal obligation to declare these assets.

In Europe, Germany is putting pressure on all member states to change the terms and conditions of the EU Savings Tax Directive.  Where certain member states have the right to take a withholding tax from interest bearing accounts held therein which belong to individuals who are resident elsewhere in Europe, other member states have signed up to an automatic exchange of information about these account holders and their assets.  Germany wants to remove the right of some member states to still withhold information and instead tax account holders.  They do not want any individual to have the right to account, asset and personal anonymity – although this right would still exist for companies.  As a result many financial advisers are suggesting to individuals who may be affected that they move their assets under the umbrella of a qualifying company structure.

Germany is thought to be one of the hardest hit nations in Europe in terms of the current global financial crisis – so no doubt it needs all the tax revenue it can get.  What’s more, with a report in the FT highlighting the fact that now private individuals are asking the government for a bailout, I’m sure Germany is cash strapped.  The story relates to billionaire Adolf Merckle who, after he attempted to asset strip VW and lost his gamble, has approached the government for a loan!  The man is a billionaire, has assets coming out of his ears and yet he effectively has the government over a barrel by saying that if they don’t help him out financially, lots of his staff at many of his companies could lose their jobs.  As you can tell, this story has incensed us – and whilst we usually try and stay balanced and neutral, there are times when the facts we’re reporting are so abhorantly disgusting that we have to voice an opinion!

And finally, America is continuing its offensive against international private banks, and UBS in particular.  It has ‘detained’ a private banker from UBS and is expected to put pressure on the individual to uncover any violations of the US banking system that the bank may have committed.  According to the Financial Times: “The Department of Justice is examining whether the bank assisted in tax evasion by helping or encouraging clients to violate US rules.  The Securities and Exchange Commission is examining whether Swiss-based UBS bankers dealing with US clients may have broken rules requiring registration to provide investment advice.” Whilst the US is clearly targeting UBS at the moment, expert industry insiders claim that the action is actually related to what’s being described as a ‘determined campaign on tax evasion’ across the board.