The International Development Committee suggested in a report published last week that the Government should bring in American-style laws in a bid to help stop international tax evasion.
Modelled on the new US Foreign Account Tax Compliance Act (FATCA), which is designed to stop Americans hiding money from the IRS abroad, the report is advocating a similar system for the UK, where the taxman here effectively becomes a client of foreign financial institutions.
The report suggested that if the UK required tax authorities to exchange information related to British citizens or corporations with overseas interests, it would establish a standard of transparency.
"We recommend that the government introduce legislation similar to the relevant section of the U.S. ... FATCA, requiring tax authorities automatically to exchange information relating to UK citizens or corporations," it says.
The committee also recommended the UK Government to use its influence "to persuade other governments to follow suit", as such a move could “enhance the ability of developing countries to increase their tax take.”
"The capacity of a developing country tax authority to obtain information on the offshore activities of its citizens or corporations is critical to its ability to curtail illicit capital flight,’ the report says.
Another reform suggested by the committee is the introduction of new accounting standards that would require corporations to report information on a country-by-country basis.
It says that this would aim to prevent multinationals from shifting profits to subsidiaries set up in tax havens, thus reducing the tax take in the countries where they actually operate.
For more information, please visit www.milsted-langdon.co.uk
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