Guernsey deal extends taxman's reach

The agreement by Guernsey to share tax information with HM Revenue & Customs could see a significant shift in power to the UK taxman as it cracks down on offshore tax evasion, according to some experts.

Tax information exchange agreements (TIEA), like the one announced by Guernsey last week, are nothing new. Guersney, one of the world’s best known tax havens, has signed up to ten of these agreements.

Andrew Watt, managing director of tax disputes and investigations at A & M Taxand, said this latest signing is of major significance because of the commercial traffic between the UK and Guernsey.

Watt believes the ratifying of the bilateral agreement could result in information exchange requests being submitted on a weekly - if not daily basis.

‘This is a tremendous tool for HM Revenue and Customs. The agreement goes way beyond what the present powers are,’ he says.

The agreement with Guernsey comes as governments around the world increase scrutiny of tax havens who are accused of allowing taxpayers to hide their money in offshore jurisdictions.

Watt says HMRC is becoming more aggressive in its pursuit of offshore tax evaders and rejected suggestions that TIEA are just token gestures designed to prevent in-depth investigations from
tax authorities.

‘If anyone thinks the UK has entered into this agreement under a smoke and mirrors façade they’re gravely mistaken,’ he says.

‘It’s a significant piece of legislation and the UK will be using it to its full advantage.

‘The UK already has one [TIEA] ratified, two are in the pipeline… they’re not just doing this for the sake of their health. HMRC are determined to be aggressive in tackling [tax] avoidance,’ he says.

Jeffrey Owens, director of the Organisation of Economic Co-operation and Development centre for tax policy and administration, also welcomes the UK and Guernsey’s agreement.

‘Guernsey has signed nine tax information agreements with other countries within the past year, making its commitment to international standards in these areas clear and strengthening its reputation as a legitimate financial centre,’ he says in a recent statement.

But some tax experts argue thatTIEA are generally of little use to tax authorities.

Richard Murphy, a tax campaigner with the Tax Research Network, says: ‘The truth is under TIEA rules unless you actually know the information you’re asking for, you can’t get it.

‘In 99.5% of cases the audit trail is such that you can’t prove the linkages to be able to warrant having the information sent to you.

‘It’s incredibly difficult to get the proof needed.’