Since 2017, tax administrations have far better and more timely access to information than in the past and Banks are changing their attitudes towards facilitating offshore evasion. They are moving away from relying on Bank Secrecy to gain a competitive advantage.
To date, more than 100 countries, including those listed by the EU as non–cooperative tax jurisdictions (Blacklist countries), have committed themselves to adopt the global standards on the automatic exchange of financial account information (AEOI) to increase tax transparency and thus prevent cross-border tax evasion.
The legal foundations for the automatic exchange of information have been in force since 1 January 2017. From this date, the veil of secrecy which allowed tax evaders to hide their assets offshore has been lifted. Because of the automatic exchange of information’s new standard introduced by the OECD, as the Common Reporting Standards (CRS) and the Component Authority Agreement (CAA), the international efforts against cross – border tax evasion are changed.
The automatic exchange of information provides for the exchange of non-resident financial account information with the tax authorities in the account holders’ country of residence. Participating jurisdictions that implement AEOI send and receive information each year, without having to send a specific request. The new global standard marks the end of an era characterized by capital flight from European countries facilitated by the proliferation of secrecy jurisdictions or tax havens that provided opportunities for transfer and concealment of assets.
Within this context, Monaco has always played an important role as non – cooperative jurisdiction. The independent State situated on the French Riviera has represented for a long time one of the most popular tax haven for business people and other super-wealthy individuals for reasons that include, among others, tax avoidance.
However, as the world becomes increasingly globalised and cross – border activities become the norm, Monaco is getting an enviable model of economic development that respects the International requirements on tax transparency and fairness advocated by the OECD. On 12 July 2016, the European Union and Monaco signed a new tax transparency agreement, under which they will automatically exchange information on the financial accounts of each other’s residents from 2018.
The information includes the owner’s name, address, country of residence and tax identification number as well as the reporting institution, account balance and capital income. This lets tax authorities check whether taxpayers have correctly declared their foreign financial accounts. The administrative cooperation between States will allow their tax authorities improved cross-border access to information on the financial accounts of each other’s residents.
Definitely, the global standard on the automatic exchange of financial account information will improve the voluntary tax compliance by private savers.
Article edited by Vincenzo José Cavallaro
Lawyer, Partner | Cavallaro e Associati