BE CLEAN OFFSHORE INVESTOR OR FACE ARREST

mfanukhona@times.co.uk

MBABANE – The bank secrecy era has come to an end.
The Times SUNDAY can reveal that the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC), which Eswatini has been ordered by EU to commit to sign or, in default lose financial benefits, seek to, among other things, deal with unscrupulous offshore account holders. The EU has given the country until the end of 2019 to comply with the following –

Become a member of the Global Forum on Transparency and Exchange of Information for Tax Purposes;

Commit to signing and ratifying the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters;
Join the Inclusive Framework on BEPS (Base erosion and profit shifting) or commit to the minimum standard and to communicate the timeline for doing so;
Failure to comply with the above will render the country unqualified to access funding and other related assistances from the EU with effect from next year.

Background

Meanwhile, in order to tackle the issue of offshore bank accounts more structurally, the United States introduced the Foreign Account Tax Compliance Act (FATCA) in 2010. FATCA requires every foreign financial institution (FFI) to review its clients and to identify potential US account holders.

It has been established that the success of FATCA surprised other countries. That was so because for many years, countries have discussed within the Organisation of Economic Cooperation and Development (OECD) and the European Union how automatic exchange of information could be the solution to combat large scale tax evasion.

However, countries with strong banking secrecy reputations like Austria, Switzerland, Panama and Luxembourg successfully blocked any meaningful progress.
Nonetheless, the OECD used the momentum created by FATCA to initiate the introduction of a standard for the automatic exchange of information, which Eswatini is expected to adopt to curb potential tax evasion in the global space.
The automatic exchange of information framework as elucidated by the OECD contains the following -  (i) a common standard on information reporting, due diligence and exchange of information; (ii) a legal and operational basis for the exchange of information; and (iii) common or compatible technical solutions.

What it means for us?
To the rich in particular, those with offshore bank accounts, experts in global finance say it effectively means the common due diligence processes will require financial institutions to identify all account holders resident in another country. On these account holders, the financial institution will have to report to their local tax authorities account details such as name, tax identification number and interest and dividends received, as well as gross proceeds on the sale of stocks.
This all has to be done within the IT format that is currently being developed as a standard for reporting.

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