The Isle of Man has agreed to hand over financial information about account holders in a ground-breaking deal with the British tax man.
And Jersey and Guernsey could be next to sign up for what some have dubbed ‘Son of FACTA’.
The Foreign Account Tax Compliance Act (FACTA) sees the US forcing foreign financial institutions (FFIs) to hand over details of any US taxpayer who is holding an account with them.
Failure to do so will see US authorities withhold 30% of future tax transactions with the institution involved.
It’s a controversial measure and many countries have signed up to exchange information on the basis that FFIs do not reveal any information directly to the US tax authorities since doing so would contravene most countries data and privacy laws.
However, the government will share the information on a reciprocal basis.
Jersey and Guernsey want tax deal
The UK is now taking the FACTA agreement one step further and increasingly making Crown Dependencies reveal who is holding an account in their tax haven.
The Isle of Man is the first well known haven to comply, and talks are ongoing with Jersey and Guernsey.
Allan Bell, Chief Minister in the Manx government, said the Isle of Man had been working for 15 years to set new standards in transparency in the overseeing of its financial services industry.
“However, the US has taken that onto a different level with the introduction of FACTA which is the automatic exchange of information on all business matters relating to US residential business people,” he said.
“Following this, the UK government said they wanted something similar and, having considered the pros and cons, we feel it is right to commit to the UK the automatic exchange of information on business maters within the FACTA framework.”
Identifying hidden money and assets
David Gauke, the Exchequer Secretary to the Treasury, said: “This agreement considerably helps boost our action against cross-border tax evasion. Sharing financial information between the Isle of Man and HMRC will identify taxpayers hiding money and assets overseas.
“Our landmark FATCA agreement with the USA has set new expectations for international tax transparency, which has in turn, triggered the deal with the Isle of Man to swop financial information.”
“People have doubted we could come to this kind of agreement, so I welcome the progress we have made so far with the Isle of Man.
“And now we are looking at reaching similar agreements with other jurisdictions and are currently in discussions with Jersey and Guernsey about the implementation of an enhanced information exchange to combat tax evasion.”