Boston, MA -- (SBWIRE) -- 08/01/2013 -- Governments globally have been taking initiatives to curb offshore tax evasion for many years. However, this phenomenon has assumed increased urgency since 2008-2009 when economies across the world, developed nations in particular, were severely impacted financially. Their prime targets have been offshore tax havens such as Switzerland and Singapore. Coordinated and individual actions taken by different jurisdictions have significant ramifications for offshore wealth management companies and other institutions whose business is significantly driven by offshore deposits. The economy at the forefront of fighting offshore tax evasion is the US. It has entered into agreements with several nations to ensure that their financial institutions implement the provisions of the Foreign Account Tax Compliance Act (FATCA), passed by US Congress. Under FATCA, the financial institutions of partner nations are required to give details of accounts held by US taxpayers with them, or be subject to a withholding tax of 30%. Jurisdictions such as the UK have been signing bilateral agreements with other economies, under which limited timeframe disclosure facilities are being offered to offshore account holders to come clean on their wealth or face penalties. Wealth management companies in tax havens entering into these agreements are expected to handle significant funds through tax payments by offshore account holders. This comes under the category of tax information exchange agreements, whereby financial institutions in treaty countries are required to submit client data.

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Key Highlights

- The US, through the medium of FATCA, has been putting the onus on financial institutions based out of its treaty partners to provide information about the US taxpayers holding accounts with them by a certain date or be subjected to withholding taxes.
- Countries such as the UK are mainly offering disclosure facilities to their citizens to come clean on their offshore wealth upon which they would be subjected to lower penalties.
- Some countries such as Germany are not hesitating from buying out stolen offshore bank data and based upon it are taking punitive measures both against those who have evaded their taxes and also the banks abetting them.
- Wealth management companies in offshore tax havens have to increasingly highlight the wealth management proficiencies that they have built over a period of time rather than highlighting confidentiality of tax information.
- Due to the reduced returns on wealth deposited offshore due to penalties, individuals will increasingly keep their money onshore. In the long run, it would be in the interest of the offshore wealth management companies to obtain full-fledged licenses to operate onshore in the countries that they have previously been dependent on business for.

Scope

Companies Mentioned in this Report: HSBC, Credit Suisse, JP Morgan UK, UBS, Bank of Singapore

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