George Osborne has been the subject of substantial criticism from both left and right over the last two years for his rather unimaginative management of the UK economy. So he must have been relieved to find his appointment of Mark Carney as the next governor of the Bank of England almost universally praised for its judgement and boldness.
However, an article published last Friday in the obscure International Tax Review suggests that Osborne’s current bout of radicalism will not end with his central bank appointments. For he has set his sights on an even bigger target – the practical abolition of tax havens under British jurisdiction.
Leaked documents from the Treasury show that the UK will announce in the Autumn Statement that it will impose its own version of the US’s Foreign Account Tax Compliance Act (FATCA) on all its Crown Dependencies and Overseas Territories. This will require every bank and financial institution from the Cayman Islands to hand over the details of every reportable account, including beneficial owners.
This will mean that the real names behind the thousands of trusts, secret accounts and brass-plate companies will need to be reported to HMRC. The days of being able to hide money offshore from the taxman will effectively be over.
Tax experts who have seen the leaked documents appear impressed that, unlike some previous attempts to deal with offshore banking secrecy, most of the obvious loopholes seem to have been eliminated. Indefatigable tax campaigner Richard Murphy, who has had barely a good word to say about previous government efforts in this field, wrote on his blog: “The evidence is now clear: the writing is on the wall for secrecy in the UK’s tax havens. There are now two options for those hiding their funds in these locations. The first is to own up now. That’s the wise option. It’s the only safe option. The alternative is to flee. My suspicion is that it’s already too late for that to work.”
The legislation is expected to take effect from 1 January 2014. The sums involved, by the very nature of their secrecy, can only be guessed at but a recent report from James Henry, a former McKinsey consultant, estimated conservatively that £13trn was hidden in tax havens. The scale of the tax lost to the Treasury can be gauged by the fact that similar bank secrecy agreements signed with Liechenstein and Switzerland might be expected to bring in £5bn-£7bn.
Osborne’s critics have suggested that he is happier going after easy tax-evading culprits, such as left-supporting comedians, rather than tackling the bigger issues of systemic tax abuse. The implementation of a UK FATCA however would be the biggest shake-up to banking secrecy and the exploitation of the tax code for a generation. With no great improvement in the economy likely using conventional measures, one can only praise the chancellor’s new-found radicalism.