Friday 19 December 2014

No safe haven, no place to hide

At last, Irish tax dodgers who salt away money in offshore accounts are being smoked out. About time, too, writes Simon O'Donovan

This week, it emerged that the Revenue Commissioners are to seek High Court orders compelling the Irish banks to disclose details of any dealings their customers have had with overseas banks or who have transferred money abroad.

This comes on top of a previous set of court orders, which forced the Irish banks to disclose details of accounts that any of their customers had with the overseas subsidiaries of the Irish banks.

The object of the latest set of court orders is to identify overseas bank accounts with foreign banks that weren't picked up in the earlier trawl.

If someone transferred money to or from one of these accounts through one of the Irish banks then they will have left an electronic and paper trail, meaning that they will almost certainly be caught in the taxman's net.

Is this latest move by the taxman some sort of quid pro quo for the recapitalisation of the banks and the unconditional guarantee of their deposits for the Government? Probably not. The State already had the legal power to demand this information, even before the banking crisis struck.

However, with all of the Irish-owned banks now completely beholden to the State, expect this latest demand for information to be fulfilled far more punctiliously than previous demands for customer details.

It may be no consolation to Irish tax-dodgers who have salted away money abroad, but they are not alone. All around the world, national governments are cracking down on the use of offshore tax havens to either dodge tax or conceal the proceeds of crime.

The beginning of the end for tax havens came in 1998 when the rich countries' club, the OECD, began a campaign against what it termed "harmful" tax competition. It threatened to publish a blacklist of tax havens that facilitated tax evasion or the laundering of the proceeds of crime.

Although they protested furiously at the time, all of the major tax havens were eventually forced to toe the OECD line.

In order to stay off the OECD blacklist, and avoid the crippling sanctions that such a move would trigger, most tax havens have now agreed to share information with the tax authorities of most developed countries.

Ireland is no exception. We already have tax information exchange agreements with Jersey, Gibraltar, the Isle of Man, Guernsey and Bermuda, while agreements are due shortly with several other tax havens, including Liechtenstein.

In practice, this means that if you use a country with which Ireland has a tax information agreement to hide undeclared income and the Revenue Commissioners come looking for you, there is no place to hide.

At the same time as the OECD has been tightening the screws on tax havens, some of the major industrialised countries have taken the gloves off in their ongoing struggle with offshore tax dodgers.

In February 2008, the German tax authorities announced that they had paid Liechtenstein bank official Heinrich Kieber €4.2m for a list of 1,250 tax dodgers and their bank account details. The Germans passed on the information to the American tax authorities, while the UK's Revenue & Customs Service offered Kieber a further £100,000 for the same information.

After the Kieber case, things could never be the same for tax havens again. If Liechtenstein, long regarded as one of the most impenetrable of tax havens, could be so spectacularly blasted open, then no tax haven anywhere was safe.

The willingness of the Germans to resort to such aggressive tactics when seeking to unlock Liechtenstein's tax secrets is testament to the huge sums believed to be hiding in offshore tax havens.

In 2007, the OECD estimated that there were assets of between $5 trillion and $7trn (€3.5trn and €5trn) being managed from offshore tax havens. That's the equivalent of somewhere between 25 and 35 times Ireland's total economic output for this year.

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