Demands from foreign governments for data on UK-based tax evaders increases

29 Oct 2012 | 09:40 am | 2 min. read

The number of requests for information about UK-based foreign nationals by foreign countries investigating tax evasion is rising sharply as governments around the world try to pull in more tax says Pinsent Masons, the international law firm.

Pinsent Masons says the number of requests for information about taxpayers received by the UK government from overseas tax authorities surged by 18% in the last year.

In 2011-12 (year ending 31 March), HMRC received 1,852 requests for information about individuals from overseas authorities under ‘Double Taxation Agreements’*, compared to 1,564 in 2010-11.

Phil Berwick, Director at Pinsent Masons, says: “The rise in international requests for information about taxpayers shows that tax authorities around the world are responding to pressure from their governments to maximise their tax revenues. It is not just HMRC that is piling the pressure on taxpayers.”

“The jump in requests shows there are very few places to hide for wealthy individuals who may be trying to avoid tax by moving their assets around the globe. International borders are increasingly meaningless for tax authorities’ pursuit of outstanding taxes.”

“London attracts Ultra-High Net Worth individuals from a huge range of countries, and the expertise of London in wealth management makes it a stable ‘haven’ for individuals looking to protect their assets from political or economic instability overseas.”

“As individuals move their assets to the UK, their home tax authority will take a keen interest in how those assets have been taxed.”

In 2011, the most requests for information** came from Norway (577 requests), followed by France (225), Spain (92), and India (37).

Norway has recently been pursuing a diverse series of international tax investigations, from carbon tax fraud to tax evasion by budget airline pilots, and has recently been locked in a dispute with Jersey over the disclosure of tax arrangements.

Phil Berwick adds: “The presence of France and Spain in the top five countries requesting data isn’t surprising. Faced with the prospect of tax increases, it looks like some of France and Spain’s wealthiest individuals have gratefully accepted David Cameron’s offer to ‘roll out the red carpet’ for them.”

According to French consulate estimates, London is home to around 400,000 French citizens, making London the 6th largest ‘French’ city.

Phil Berwick adds: “London’s prime property market is seen by many as a solid investment, and despite the occasional newspaper headline, the UK remains a very stable place to invest.”

Pinsent Masons adds that political instability in the Middle East in the aftermath of the Arab Spring will also have driven the movement of wealth to the UK.

HMRC has one of the world’s largest networks of Double Taxation Agreements, with over 100 countries having signed a Double Taxation Agreements with the UK.

*Double Taxation Agreements are designed to prevent an individual’s income or assets being taxed in two different countries. However, Double Taxation Agreements provide tax authorities with the opportunity to find out the value of assets an individual has declared overseas, which helps authorities assess the tax liability of that individual in their ‘home’ tax jurisdiction.

UK citizens may be the target of some of the requests, for example, those with property overseas.

**Where the source is known.

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