Thursday, April 30, 2009

TJN writes to the G20

The following letter has gone by post to the members of the G20 working group number two - the group working on secrecy jurisdictions - and to the list of members of the working group working on the G20 final report - and all the expert advisers of those groups. It focuses exclusively on the need for automatic information exchange, a much more effective deterrent than the "by request" approach adopted by the OECD.

28th April 2009

Dear X

Re: Automatic Exchange of Tax Information

The Statement Issued by the G20 Leaders, April 2, 2009, at the London Summit affirmed that “The era of banking secrecy is over”.

The G20, at its London Summit, called for greater international cooperation on exchange of information for tax purposes.

The Tax Justice Network believes that only automatic exchange of information between governments constitutes effective exchange of information which will deter tax evasion.

The European Union, in its Directive on the Taxation of Savings, has adopted automatic exchange of information for interest income, and has proposed that such Directive be expanded to cover the automatic exchange of information for other types of income.

The Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System, chaired by Joseph Stiglitz, a Nobel Laureate in Economics, recommended in its report of March 19, 2009, automatic exchange of information:

“The effective implementation of national systems of taxation form a crucial part of domestic development finance. Measures must be taken to preserve national autonomy in the selection of sources and methods of government financing while ensuring that national differences do not create incentives to evade responsibility of contributors to the support of government policies. An efficient method of achieving this result would be the acceptance by all countries of an amendment of Article 26 of the United Nations Model Double Taxation Convention between Developed and Developing Countries to make the exchange of information automatic.”

Agustin Carstens, Finance Secretary of Mexico and formerly Deputy Managing Director of the International Monetary Fund, has requested, in a Letter of February 9, 2009 to U.S. Treasury Secretary Geither, that the United States exchange automatically with Mexico information about bank deposits held in the United States by Mexicans:

“In continuing these efforts, both fiscal and law enforcement, I believe that one of the key elements of information that Mexico and the United States should begin sharing is the one pertaining to interest paid by banks of one country to residents of the other. The [automatic] exchange of information on interest paid by banks will certainly provide us with a powerful tool to detect, prevent and combat tax evasion, money laundering, terrorist financing, drug trafficking and organized crime”.

The Declaration on Strengthening The Financial System-London Summit, 2 April 2009, stated:

We are committed to developing proposals, by end 2009, to make it easier for developing countries to secure the benefits of a new cooperative tax environment.

The way to implement that commitment, and to put an end to the era of bank secrecy, is by the automatic exchange of tax information between governments.


John Christensen

International Secretariat
Tax Justice Network


Anonymous Todd Tucker said...

Do you have any details on the U.S.-Canada automatic TIEA? How does it stack up against the EU Savings Directive, or the model legislation?

6:23 am  
Anonymous TJN said...

Todd, this blogger doesn't immediately know the answer but is asking around. Hopefully provide info in the next few days - please send a reminder if you haven't heard anything soon.

11:14 am  
Anonymous TJN said...

Todd: an update
The regulations under section 6049 of the US Internal Revenue Code (Regulation 1.6049.8 and 1.6049-4 and 1.6049.6) provide that if a bank in the United States accepts a deposit from an individual who is resident in Canada, the bank in the United States must inform the US Internal Revenue Service "IRS") . The IRS provides that information automatically to the Canadian Government. There is no TIEA between the United States and Canada, but there is a comprehensive double taxation agreement with an exchange of information clause.

11:33 pm  

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