G-20 Pushes for Measures to End Tax Evasion

The Group of 20 countries called Friday for a coordinated effort to stop international tax evasion, urging governments to systematically share bank data.

Finance ministers and central bankers of the G-20, meeting in Washington, said in a communiqué that automatic exchange of tax-relevant bank information should be adopted as the global standard.

The officials, who were meeting in Washington, also noted the problems of economic weakness and high unemployment in many countries, and called for more action “to make growth strong, sustainable and balanced.” They acknowledged Japan’s recent decision to sharply increase the supply of money to end deflation, but did not criticize the move for driving down the value of the yen, saying only that they would “refrain from competitive devaluation and will not target our exchange rates for competitive purposes.”

The automatic exchange of tax data, an approach the United States has pushed for, would represent a major change from the current procedures, in which countries are expected to provide such information only on request — as when tax officials seek to track payments across national borders during an audit.

Under automatic exchange, governments would routinely transfer all foreign taxpayers’ data to their home governments, making it far more difficult to hide assets from the taxman.

The impetus for the new approach is a U.S. law, the Foreign Account Tax Compliance Act, or Fatca, requiring Americans with overseas accounts and non-U.S. financial firms to meet tough financial disclosure requirements. Because Fatca, in practice, conflicts with privacy laws in many countries, Washington has been working out bilateral deals in which overseas financial institutions share that data first with their own governments for transmission to the U.S. Internal Revenue Service.

European governments, initially skeptical about the idea, have become more enthusiastic amid public outrage over the secret offshore finance records recently unearthed by the International Consortium of Investigative Journalists. In France, President François Hollande’s government has championed the more aggressive hunt for tax dodgers since his government was rocked by the disclosure that the recently ousted budget minister, Jérôme Cahuzac, was squirreling money away in a Swiss account.

“Fatca has been a game changer,” Pascal Saint-Amans, director of the Center for Tax Policy at the Organization for Economic Cooperation and Development, said Friday.

Mr. Saint-Amans noted that in the past week Luxembourg, long one of Europe’s most opaque financial centers, had agreed to begin automatically sharing data in the face of pressure from its E.U. partners and the United States.

The challenge, Mr. Saint-Amans said, is to make sure the right information technology is in place to allow for secure account data transfer on a global scale. That is something the O.E.C.D. is now working on, he said.

The G-20 issued its statement Friday after the O.E.C.D. earlier in the day issued a progress report that showed Switzerland — which is not a G-20 member — was still struggling to get off a so-called “blacklist” of nations cited for a lack of cooperation on tax data.

An additional 13 jurisdictions that are not in the G-20 — including Guatemala, Lebanon, Liberia and Panama — have not made the necessary legal and regulatory changes to be removed from the blacklist, according to the report, compiled by the O.E.C.D’s Global Forum on Transparency and Exchange of Information for Tax Purposes.

The other blacklisted nations are Botswana, Brunei, Dominica, Marshall Islands, Nauru, Niue, Trinidad and Tobago, United Arab Emirates and Vanuatu.

The Global Forum is now moving toward the adoption of a rating system, under which it will grade nations’ compliance with transparency agreements, and expects to roll that system out in November.

The United States’ push for access to overseas account data began after UBS, the biggest Swiss bank, was found several years ago to have been encouraging Americans to hide assets abroad. UBS in 2009 paid $780 million and turned over details about thousands of client accounts to end prosecution.

While Switzerland has met most of the requirements for being removed from the O.E.C.D. blacklist, its status, the report noted, “is still subject to conditions.” Swiss officials are currently trying to negotiate their way out of an international assault on their banking secrecy, led by the United States, Germany and France. Recent media reports have said a deal to open American clients’ Swiss banking data to the I.R.S. may be near.

Mario Tuor, a spokesman in Bern for the Federal Finance Ministry, said Friday that the Swiss government was working to meet the conditions for being removed from the list, and he said that it was unfair to lump Switzerland with truly uncooperative nations. Mr. Tuor said he could not comment about the ongoing negotiations with Washington.

In Washington, Dena W. Iverson, a Justice Department spokeswoman, declined to comment.

Switzerland has been locked in a dispute with the United States over its banking secrecy since 2009, when UBS, the giant Zurich-based bank, entered into a deferred prosecution agreement with the U.S. Justice Department, agreeing to pay $780 million and hand over data on thousands of clients to avoid criminal charges that it sought to defraud the Internal Revenue Service.

Since that time, the Swiss have taken a number of steps to accommodate American demands, including agreeing to more information sharing, but banks have shown dogged determination to maintain the privacy law, which makes it a crime to divulge some client information. Washington continues to apply pressure. Last year, U.S. prosecutors indicted Wegelin Company, Switzerland’s oldest bank, effectively putting it out of business.

In the latest salvo, two Swiss men — including Stefan Buck, a member of the executive board of the Zurich lender Bank Frey, and Edgar Paltzer, a partner at a Swiss law firm — were indicted this week by New York prosecutors on conspiracy charges.

Article source: http://www.nytimes.com/2013/04/20/business/global/g-20-pushes-for-measures-to-end-tax-evasion.html?partner=rss&emc=rss