Governments around the world are about to switch on a huge data exchange network aimed at catching offshore tax dodgers.
The latest announcement about the network, called the common reporting standard, lists more than 3,200 treaties between more than 100 countries that are taking part.
All are ready to start swapping data from September – and some have started already.
The common reporting standard is an agreement between tax authorities to notify each other about offshore accounts and investments held by offshore taxpayers living in foreign countries.
So, British taxpayers with bank accounts or investments held in Dubai or Abu Dhabi, United Arab Emirates will have their personal and financial details logged with HM Revenue & Customs.
Common reporting standard
The UK has 64 tax exchange agreements under the common reporting standard.
The common reporting standard is in addition to the US Foreign Account Tax Compliance Act (FATCA), which allows HMRC and the US Internal Revenue Service to share information about British taxpayers with bank accounts and investment in America.
The common reporting standard covers 124 countries, including many that are considered tax havens.
The Organisation of Economic Co-Operation and Development (OECD) is managing the standard and has published a list of all participating countries and their agreements with other nations.
The standard is part of an international crack down on tax avoidance by companies and individuals.
Obligation for taxpayers
“As the world becomes increasingly globalised and cross-border activities become the norm, tax administrations need to work together to ensure that taxpayers pay the right amount of tax to the right jurisdiction,” says the OECD.
“A key aspect for making tax administrations ready for the challenges of the 21st century is equipping them with the necessary legal, administrative and IT tools for verifying compliance of their taxpayers.
“Against that background, the enhanced co-operation between tax authorities through automatic exchange of information is crucial in bringing national tax administration in line with the globalised economy.”
HMRC was an early adopter of the common reporting standard and has received data from overseas since September 2017.
Taxpayers have no obligation under the standard – the compliance burden is on financial institutions to report to their national tax authority, which passes the data onto the relevant foreign tax authority.