12 August 2009

The Tax Chamber of the First-tier Tribunal have today ordered over 300 banks to give details to HM Revenue & Customs (HMRC) about their customers who hold offshore accounts.

HMRC can now issue the information notices to banks ahead of the New Disclosure Opportunity (NDO). The NDO will allow people with unpaid taxes linked to offshore accounts or assets to settle their tax liabilities at a favourable penalty rate.

HMRC will use this information to ensure everyone pays the right tax and to check that NDO disclosures are complete.

Under the rules of the NDO, people who make a complete and accurate disclosure will qualify for a 10% penalty. Those who choose not to take this opportunity and are subsequently found to have undeclared tax liabilities are likely to face a 30% or higher penalty and also run an increased risk of criminal prosecution.

The Right Honourable Stephen Timms MP, Financial Secretary to the Treasury said:

“It is wrong that some people evade paying their fair share of tax by hiding assets in offshore accounts. Today’s ruling represents real progress in creating a level playing field for all taxpayers.”

Dave Hartnett, HMRC Permanent Secretary for Tax, said:

“I know there are people who regret not taking advantage of our Offshore Disclosure Facility (ODF) in 2007 which focused primarily on the customers of five large banks. Today we have successfully applied to get information on the offshore accounts and assets of customers of over 300 further banks. I urge any of them who have unpaid tax liabilities connected to these accounts now or in the past to come forward and make a full disclosure during the NDO because we will use the information provided by the 300 banks to pursue those people who continue to flout the UK’s tax laws.”

 One of the better known offshore banks bites the dust.

Ministers Statement

The Government has today decided, having consulted with the Board of Anglo Irish Bank Corporation plc (“Anglo”), to take steps that will enable the Bank to be taken into public ownership. This decision has been taken after consultation with the Central Bank and the Financial Regulator which has confirmed that Anglo Irish Bank remains solvent. Anglo Irish Bank is a major financial institution whose viability is of systemic importance to Ireland. Anglo has a balance sheet of some €100bn with a substantial deposit base which the State is determined to safeguard. The Government has made clear that it will ensure its continued viability. Anglo Irish Bank will continue to trade normally as a going concern, with appropriate Government support as necessary. All Anglo employees remain employed by the company.

The funding position of the bank has weakened and unacceptable practices that took place within it have caused serious reputational damage to the bank at a time when overall market sentiment towards it was negative. Accordingly the Government believes that the recapitalisation is not now the appropriate and effective means to secure its continued viability. Therefore the Government must move to the final and decisive step of public ownership.

The Government believes that the prospects for the institution are solidly underpinned in the new structure, with the benefit of state ownership and a renewed management and Board. In the current circumstances the State is the only available potential owner.

The recently appointed Chairman of the Board, Mr. Donal O’Connor, will stay on as Chairman. Anglo will be managed on an arms length basis as a commercial entity. A new Board will be appointed having regard to the need for appropriate continuity.

Shareholder rights will be respected in this process. The relevant legislation outlines a process for determining compensation as appropriate.

All customers of Anglo Irish Bank can be assured that the full amount of their deposits and savings are further safeguarded by this action. They can also be assured that they can and should continue transacting with Anglo as normal and there is no need for customers to take any steps as a result of this announcement. Anglo Irish Bank will communicate directly with all customers in the coming days.

Information will be available on the websites of Anglo Irish Bank, the Central Bank, the Financial Regulator, and the Department of Finance. Customers with particular queries may also phone Anglo Irish Bank or the Financial Regulator.

Creditors (including bondholders) of Anglo Irish Bank can be assured that it will continue to service its obligations and will repay its debts at maturity.

The Government has prepared legislation to put this decision into effect. This will be presented to the Houses of the Oireachtas on Tuesday.

Tomorrow before the markets open, it is expected that the Irish Stock Exchange and the UK Listing Authority will announce that Anglo shares will be suspended from listing on the Stock Exchanges.

The Minister said “I would again stress that this Government decision safeguards the interest of the depositors of Anglo, and the stability of the economy, given the significance of Anglo in this regard, as already recognised by the European Commission. The bank will continue to operate as normal and depositors and creditors should continue to transact as normal.”

Customers of all financial institutions can have confidence that the wider financial system in Ireland remains well capitalised and liquid and that the Irish authorities will be proactive to ensure that their interests are protected and their deposits and debts are secure.

The Government will ensure the continued viability of all systemic financial institutions.

The Government remains fully committed to the recapitalisation proposal already announced in relation to AIB and Bank of Ireland. These plans include injection of core tier 1 capital in the form of preference shares and underwriting of further core tier 1 capital issuance.

Ends January 15, 2009 Draft Legislation

Another rehashed report. In 2004 the same Senators presented a similar report to try stop American corporations from using offshore companies to avoid taxes. Nothing has changed since.

Dorgan, Levin Release GAO Study on Offshore Tax Haven Subsidiaries

WASHINGTON, D.C. – A new Government Accountability Office (GAO) report [PDF] released today by U.S. Senators Byron Dorgan (D-ND) and Carl Levin (D-MI) shows that a majority of the largest publicly-traded companies and federal contractors in the United States use multiple subsidiaries in offshore tax havens to conduct business. Dorgan and Levin, who have focused on combating offshore tax abuses causing an estimated $100 billion in lost U.S. tax revenues each year, point out that many of these companies are paid with taxpayer dollars and some have also received billions of dollars in taxpayer bailout funds.

“This report shows that some of our country’s largest companies and federal contractors, many of which are household names, continue to use offshore tax havens to avoid paying their fair share of taxes to the U.S. And, some of those companies have even received emergency economic funds from the government,” said Senator Dorgan. “I think we should take action to shut down these tax dodgers and we will be introducing legislation to do just that.”

Senator Levin said, “We need to put an end to the use of offshore secrecy jurisdictions as tax havens. We must get to the bottom of activities such as the following: Citigroup has set up 427 tax haven subsidiaries to conduct its business, including 91 in Luxembourg, 90 in the Cayman Islands, and 35 in the British Virgin Islands. Hundreds more tax haven subsidiaries operate under strict secrecy laws in places like Switzerland, Hong Kong, Panama, and Mauritius. But not all large U.S. companies are major tax haven users and there is great contrast between competitors. For example, Pepsi has 70 tax haven subsidiaries, while Coca Cola has 8; Morgan Stanley has 273, while Fannie Mae has 0; and Caterpillar has 49, while Deere has 3.” Levin chairs the U.S. Permanent Subcommittee on Investigations, which has made offshore tax abuse a major subject of its investigations.

Dorgan and Levin requested the GAO report to get detailed information on both U.S. corporations and federal contractors using tax havens. Using publicly-available data filed with the Securities and Exchange Commission, GAO determined that 83 of the 100 largest publicly-traded corporations and 63 of the 100 largest federal contractors maintain subsidiaries in 50 tax havens.

The report updates a similar GAO report performed for the Senators in 2004. A complete listing of the 100 largest publicly- traded companies and the 100 largest contractors and their tax haven information is available in the GAO report, including the number of tax havens for each company and their locations.

Download the GAO report: International Taxation: Large U.S. Corporations and Federal Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or Financial Privacy Jurisdictions [PDF]