Foot report - some positives

We have already given our opinion on the general thrust of the latest Foot Report: it is a weak piece of work by someone who does not have a very good feel for how fiscal policies shape markets and society. Yet it does contain some good points.

One useful thing the report does is to recognise that the OECD's standards on information exchange are inadequate. As Foot says (point 4.30):

"In the longer term, the trend for greater transparency is likely to result in pressure to move to a system of automatic exchange of information with the aim of combating tax evasion by individuals on a cross-border basis. . . . The jurisdictions within the scope of this Review must keep pace with international developments and move towards full automatic information exchange wherever possible. . . . The Review encourages (Guernsey and the Isle of Man) to announce a firm date for a move to automatic exchange. . . The UK should call on all EU Member States and third party countries which currently apply the withholding tax option to also make a similarly firm commitment."

This is not bad, and somewhat better for recognising, albeit in a mealy-mouthed way, that the EU Savings Tax Directive (STD), which would be the foundation for automatic information exchange, could be beefed up:

"There is, however, pressure to remove the withholding tax option and a proposal to apply the EUSD to a broader range of savings income."

What is needed is a major overhaul of the EU STD to cover all sorts of other income, not just savings income - covering trusts, anonymous corporations and any number of other entities. This, if implemented, would mark a real sea change.

And in this context, one other positive thing is worth pointing out from the Foot report. Section 7.39 says:

"During the course of the consultation, a number of NGOs raised concerns about the extent to which the lack of transparency in the ownership of corporate vehicles in the jurisdictions facilitated financial crime (including tax evasion)."

(Hurrah! It is nice to be noticed.) He goes on:

"The Review shares these concerns, but such transparency issues also arise to a greater or lesser extent in most major jurisdictions. For example, within the UK, most trusts are not subject to financial regulation and therefore no agency monitors the ownership or behaviour of these trusts."

We agree - look at the statistics on trusts here, for example, which made a related point:

"None of the reviewed secrecy jurisdictions has a central register of trusts and foundations that is publicly accessible via the internet."

The Foot Review goes on to note:

"7.40 In the US, a more egregious loophole exists in the fact that a number of individual States, notably Delaware, permit the creation of international business companies without adequate monitoring of their beneficial ownership."

Yes: it is just as we have noted. And we are delighted to see Foot say something else we've been saying for a long time:

"The Review considers that the FATF should conduct tougher checks than it currently does."

No question. The FATF, like the OECD's list system, is little more than a whitewash mechanism.

And we are partially pleased to see Foot saying this, too:

The Review has, therefore, concluded that the UK should take the lead internationally in encouraging improvements to:
• ‘know your customer’ international minimum standards (particularly in respect of
the role of ‘eligible introducers’);
• the monitoring of PEPs (Politically Exposed Persons); and
• the transparency of beneficial ownership of companies and trusts."

Well and good, as far as it goes. But why should the UK lead on "encouraging" these improvements. Why can it not simply require these improvements in the array of places over which it has so much control?