The G8 summit in June 2013 hosted by the British Prime Minister David Cameron at Lough Erne in Northern Ireland generated some impressive headlines on participants' commitment to ensure cross-border information exchange and transparency on tax matters. It is currently unclear, however, where these declarations of intent will lead in practice. It is moreover likely that some of the issues covered by the G8 Communique are already covered by existing measures in some jurisdictions. Nevertheless, of particular interest are new commitments to multilateral exchange of information between tax authorities and agreement to develop new measures to ensure that information about the beneficial ownership of companies and trusts is accessible to the relevant authorities.
Core principles announced by G8 on transparency of legal structures
The core principles announced at the G8 summit on "transparency" in relation to companies, trusts and other legal arrangements include the following
- companies should know who owns and controls them and their beneficial ownership
- such information should be accessible to law enforcement, tax administration and other relevant authorities; this could be achieved through central registries in each jurisdiction
- similarly the trustees of express trusts should know details of the settlors and beneficiaries and this information should be readily accessible to the relevant authorities
- misuse of financial instruments and of certain shareholding structures which might obstruct transparency, such as bearer shares and nominee shareholders and directors, is to be prevented
- countries should put in place effective anti-money laundering and counter terrorist obligations to identify the beneficial ownership of customers and there should be effective sanctions for regulated businesses that fail to comply
- national authorities should co-operate across borders in relation to these matters
G8 announcements on tax
Besides the above measures on transparency, the G8 made a number of other commitments relating to tax
- to put in place national action plans to counteract the misuse of companies and other legal arrangements
- to develop a single, global model for the automatic exchange of information between tax authorities, building on existing systems
- to support developing countries in building capacity to collect tax and participate in global initiatives for the exchange of information
- support for the Financial Action Task Force on implementing anti-money laundering measures
- support for the OECD's work on preventing exploitation of loopholes to move company profits to low tax jurisdictions
UK action plan on transparency
The UK has already published its action plan aimed at counteracting misuse of companies, trusts and other legal arrangements and designed to enhance transparency. The action plan incorporates the following principles:
- to ensure that companies hold accurate information on their beneficial ownership and, by amendment to the Companies Act 2006, to make sure the information is available to the authorities through a central registry at Companies House; there is to be a consultation on whether this information should be publicly available
- to review corporate transparency including issues relating to bearer shares and nominee directors
- to ensure that trustees of express trusts are obliged to hold accurate information on beneficial ownership of the trust, that the relevant (UK) authorities have access to this and that mechanisms are in place to share it with other jurisdictions
- to support the Crown Dependencies (Isle of Man and Channel Islands) and the Overseas Territories (which include the Cayman Islands, the British Virgin Islands and the Turks and Caicos) in publishing their own Action Plans on Transparency (in fact some of these action plans have already been published)
Conclusion
It is certainly easier to make broad brush commitments than to put them into practice, especially in such difficult areas as tax evasion and avoidance. However, some important statements of intention have been given at the G8 meeting and in the run up to it. At the moment these are too broadly formulated for us to indicate how they will work in practice but we will be keeping a watching brief on further developments and will be reporting again in due course.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
