How much substantive progress was made at last week's summit?
Last week’s G8 Summit began in an unconventional way…with ties off, shirt sleeves rolled up and a morning dip in Lough Erne. It ended with a much-publicised commitment by the G8 countries to clamp down on money launderers, illegal tax evaders and corporate tax avoiders.
In a series of core international principles on the exchange of information, governments agreed to grant one another automatic access to information on their residents’ tax affairs and to compel shell companies to identify their effective owners.
The UK, for its part, is proposing to set up a central registry of beneficial owners, but it is yet to be decided whether this should be made publicly accessible. It will also review the role of nominee directors and bearer shares in corporate life.
G8 Leaders at Lough Erne last week
Wasting no time, the spotlight was soon shining once again on tax matters when it was announced at the end of the week that a windfall of £3.2 billion in respect of unpaid taxes on funds in Swiss bank accounts had boosted Britain’s public finances in May.
The payment represented the fruits of a tax agreement between the UK and Switzerland which followed in the footsteps of the success of the Liechtenstein Disclosure Facility. The effect of the UK/Swiss agreement was that wealthy British citizens with Swiss bank accounts were subject to a levy of up to 41 per cent of their savings if they did not disclose account details to the Swiss authorities.
The agreement is forecast to bring in more than £5 billion of total revenue over the next six years, according to Treasury figures. It will no doubt be regarded as an overwhelming victory in David Cameron’s fight against 'the scourge of tax evasion'.
Similar co-operation agreements were signed earlier this year with Guernsey, Jersey and Isle of Man, presenting opportunities for eligible customers with investments and assets held in the respective jurisdictions to bring their tax affairs up to date. There is likely to be a succession of similar deals now – a true sign of the times in which we live.
Last week’s tax windfall was no doubt welcomed by Mr Osborne, ahead of this week’s review where he will outline projected spending rules that will govern the Treasury in the first year of the lifetime of the next government.
It must also have gone some way towards validating the time, effort and resource that has been invested by the Government to date to curb tax 'injustice' and to encourage taxpayers to declare and settle historic tax liabilities. The emphasis on automatic exchange, transparency and compliance is stronger than ever before.
But how much substantive progress was actually made at last week’s summit in terms of redefining the global rules on tax and transparency? By all accounts, no consensus emerged on sensitive matters such as the need for public registers of company beneficial ownership and these issues continue to provide fertile ground for debate.
However, the seminal message was delivered loudly and clearly – tax transparency is (slowly but surely) rising up the international agenda. This focus, at inter-Governmental level, on tax transparency sends a clear sign that there should no longer be places where tax evaders can escape scrutiny.
Lydia Essa, private wealth law firm, Maurice Turnor Gardner LLP