Earlier this week, the OECD issued a series of rules to force financial service providers, lawyers and accountants, among others, to “inform tax authorities of any schemes they put in place for their clients to avoid reporting under the OECD/G20 Common Reporting Standard (CRS) or prevent the identification of the beneficial owners of entities or trusts.”
The rules will be submitted to the G7 group for discussion as part of a worldwide effort to curtail tax avoidance.
According to this release, “the rules require any person that is an Intermediary in respect of an arrangement, which has the hallmarks of a CRS Avoidance Arrangement or Opaque Offshore Structure, to disclose certain information on that arrangement or structure to the tax authorities.”
Furthermore, intermediaries are “required to file a disclosure when the arrangement or structure is first made available for implementation, or whenever the Intermediary provides services in respect of the arrangement or structure,” and the information shared should “[include] design details as well as the users and any other Intermediaries involved in the supply of that arrangement or structure.”
Additionally, says the OECD, “the rules do not require the Intermediary to disclose information that is subject to obligatory professional secrecy rules.”
Plus, “there are also rules that limit the need for the Intermediary to make duplicate disclosures in respect of the same arrangement or structure.”
The OECD defines intermediaries as “those persons responsible for the design or marketing of the arrangement or structure (“Promoters”) as well as certain persons that provide assistance or advice with respect to the design, marketing, implementation or organisation of that arrangement or structure (“Service Providers”).
Parties Involved Speak Out on New Tax Avoidance Rules for Advisors
Following this announcement, Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy & Administration, said, “Time is up for tax evaders and their advisors that still want to game the rules and continue to hide assets offshore.”
“With the automatic exchange of CRS information becoming a global reality this year, it is the right moment to get hold of those taxpayers and advisors that attempt to undermine the reporting on offshore assets and that try to play the new global tax transparency framework.”
“The mandatory disclosure rules will be a powerful tool to detect taxpayers that continue to refuse to be compliant with their obligations to declare their assets and income to their tax authorities. They will also have a deterrent effect against the design, marketing and use of schemes to avoid CRS reporting or hide beneficial owners behind opaque offshore structures.”
“This is key both for the integrity of the CRS and for making sure that taxpayers that can afford to pay advisors and to put in place complex offshore structures do not get a free ride,” Saint-Amans concluded.
Nicholas Shaxson, author of Treasure Islands and a tax justice campaigner, was less hopeful with regard to these new rules.
On Twitter, he made mention of a discussion he had with a financial service provider who made it clear to him that these new rules would be very tough to be implemented.
According to the OECD document, “this approval does not entail endorsement as a minimum standard,” which Shaxson’s source says means that jurisdictions “can implement this if they want to.”
From his discussion with his source, Shaxson learned that lawyers in Switzerland are laughing out loud already saying they “will never do this.”
Shaxson’s notes compare these rules to sending “this big heavy tiger to attack you,” but “they have removed all of its teeth” and “it is going to gum you to death.”
Golden Visas, RBI & CBI Also Targeted by the OECD
In addition to these sets of rules, the OECD is also currently working on an initiative to handle the use of “golden” visas, residency by investment (RBI) schemes and citizenship by investment (CBI) programs to avoid reporting under its Common Reporting Standard project.
Back in February, the OECD issued a month-long consultation that “(1) assesses how these schemes are used in an attempt to circumvent the CRS; (2) identifies the types of schemes that present a high risk of abuse; (3) reminds stakeholders of the importance of correctly applying relevant CRS due diligence procedures in order to help prevent such abuse; and (4) explains next steps the OECD will undertake to further address the issue, assisted by public input.”
Contributions on this initiative will be accepted up until March 19th, 2018.