Global tax is undergoing a major upheaval that has largely passed without comment or notice.
One after another, countries are falling in to line with the controversial Foreign Account Compliance Tax Act (FATCA) as Washington pressures foreign financial institutions to spill the beans on US taxpayers secreting assets in their vaults.
Britain has already signed up to an intergovernmental agreement (IGA) with the US to supply FATCA information to the Internal Revenue Service (IRS) in return with similar details from US financial institutions tipping off HM Revenue & Customs (HMRC) about assets held for UK taxpayers.
Singapore is the latest nation to join the talks, which is a surprise to some as Singapore has often shown a laissez faire attitude to how residents treat overseas tax. Singapore is one of the only countries that didn’t sign up to the European Union Savings Tax Directive.
Other nations waiting to sign up to FATCA include Spain, Italy, Germany, Japan, Australia, Guernsey, Jersey, the Isle of Man and India.
Tax talking shop
But while FATCA takes all the headlines, a bigger shift is going on at a more seismic level.
Although FATCA is US legislation, the inspiration is the tax treaty network slowly but surely being put in to place by the Organisation of Economic Co-operation and Development (OECD).
The OECD represents a tax talking shop for most of the world’s leading economies.
Since a pact reached in Oslo, Norway, in 2010, the OECD has toiled to set up a reciprocal tax network that lets nations swap details on the financial affairs of non-residents with their home country.
FATCA is one manifestation. The Hacienda in Spain has collaborated with offshore financial centres to compile information about assets held Spanish taxpayers outside Spain.
Another financial information warehouse is the European Union Savings Tax Directive, which has similar provisions to FATCA for sharing details about the holdings of individuals in one country with a tax authority in another.
The prize is extra revenue
The landmark agreement between Britain and Switzerland – soon to be followed by similar deals with Austria, Germany and France – brings another errant nation with a veil of secrecy over financial information in to the fold.
Soon, tax treaty tentacles will reach out and link all the tax authorities of most major nations.
The objective is to banish the opportunities for cross-border tax management by companies and individuals.
The prize is extra revenues for governments.
FATCA proposes to raise £6.3 billion for the USA, Spain is looking at plugging a £6.6 billion tax shortfall, while the UK is looking at £9 billion.
At the heart of this network is the unsung OECD, which has created the international legal framework that culminates in an all-seeing and all-knowing global tax Big Brother.