Over 80 countries sign pact to end bank secrecy

More than 80 countries have signed a deal that could help end banking secrecy—in what the sponsors hope will be a major step in the global battle against tax evasion and fraud.

A total 51 countries signed up to the Multilateral Competent Authority Agreement under which their national tax authorities will exchange information automatically from September 2017. More than 30 other countries said they would sign up a year later in 2018.

Among the first round of signatories or “early adopters” were EU countries, as well as previously staunch proponents of banking secrecy such as Liechtenstein and tax havens like the Cayman or Virgin Islands.

Others, such as Austria and Switzerland, the Bahamas and the United Arab Emirates, will follow in 2018.

The signings in Berlin crowned two days of talks by the Global Forum on Transparency and Exchange of Information for Tax Purposes, hosted by German Finance Minister Wolfgang Schaeuble. The aim is for every country to be kept fully informed about the offshore holdings of its citizens.

Economist Gabriel Zucman, a specialist in fiscal fraud, has calculated that about 5.8 trillion euros (US$7.4 trillion) is stashed away in tax havens, depriving authorities all over the world of around 130 billion euros in revenue each year.

The international movement to end banking secrecy has gained new momentum recently with the enactment in the United States of its 2010 Foreign Account Tax Compliance Act or FATCA. The law obliges foreign banks to report to the US Internal Revenue Service (IRS) on the offshore holdings of US clients in excess of 50,000 euros.

India put off the signing of a crucial multilateral agreement—called Competent Authority Agreement (CAA)—aimed at facilitating access to financial information on taxpayers abroad, due to the uncertainties on whether India can commit to maintaining the confidentiality of inputs received from foreign countries in accordance with the international pact, specifically in the wake of the Supreme Court of India’s ruling wherein it sought a full disclosure by the government of illegal accounts held by Indians abroad.

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