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http://www.ft.com/cms/s/0/bea8b704-a120-11e2-990c-00144feabdc0.html#ixzz2QpLM98JN By Madison Marriage Germany and France have thrown their weight behind the adoption of a framework that would facilitate the automatic exchange of tax information across Europe. The two countries are expected to publish a common position on a proposal to adopt an EU version of the US Foreign Account Tax Compliance Act as they attempt to fight tax evasion following high-profile scandals. This comes as Sven Giegold, the outspoken German MEP, plans to lobby the European Commission to adopt a directive that would bring a Fatca-style agreement into European law. Fatca, which will be implemented in 2014, will require asset managers and other European financial groups to pass details of US clients to tax authorities, resulting in higher reporting costs. German and French finance ministers have said they are ready to put in place similar measures. Pierre Moscovici, the French finance minister, and his German counterpart Wolfgang Schäuble issued statements on April 7 calling for greater tax information sharing across Europe in a move that would closely imitate Fatca. It followed an admission on April 2 by Jérôme Cahuzac, French budget minister, to lying repeatedly when he denied holding a secret Swiss bank account. Mr Cahuzac said he held €600,000 offshore, although reports in the Swiss press suggest the sum was as high as €15m. Mr Moscovici said in an interview with a French radio station that he proposed developing a “European Fatca” with automatic exchange of information. “In the next few days [France and Germany] will adopt a common stance to ensure we make real progress with this endeavour,” he said. Mr Schäuble also told the newspaper Saarbrücker Zeitung that Germany welcomes “every step towards” the automatic transfer of information. He added that the German government is collaborating with other countries on this. At the same time, Mr Giegold’s Green party will also propose a Fatca-style tax package to the Commission. The measures, including the automatic exchange of information between European member states, will be designed to curtail tax evasion by wealthy Europeans. The package will require non-EU financial institutions to provide European tax authorities with information on EU taxpayers’ earnings, which would “exert pressure on tax havens”, the Green party said in a statement. Mr Giegold, who won notoriety through his controversial bonus-cap proposal under Ucits V, says: “To ensure that our financial system respects national tax laws, we need a European Fatca now.” He believes Germany and France should take the initiative and lead a coalition of countries that are willing to take action. Florian van Megen, a tax policy researcher at the European Parliament and parliamentary assistant to Mr Giegold, says the Commission is already “seriously” considering adopting such an agreement. “The [Commission] has seen the US do it without waiting for anyone else – why not catch the same train?” he says. “If Fatca seems to work and compliance seems to be possible, it makes sense to have a similar international framework.” The proposed European tax package would go further than Fatca. Under Fatca, details of all US clients with assets over $50,000 must be passed to the US Internal Revenue Service. European groups in Fatca-partnering jurisdictions can meet their Fatca obligations with their local tax authorities. Several Fatca agreements have already been reached by European member states and the US, including the UK, France, Germany, Italy, Spain and Switzerland. Luxembourg is yet to broker a Fatca agreement with the US but it is said to be close to completing one. Luc Frieden, Luxembourg’s finance minister, recently said his country was ready to extend its collaboration with tax authorities abroad and would no longer reject the idea of an automatic exchange of information between countries. Keith Lawson, senior counsel in tax law at ICI Global, the international fund association, says it is unlikely a European Fatca-style agreement would increase costs for fund groups in Europe. He says: “If firms are already implementing procedures to identify the tax residency of investors under Fatca, it will be easy enough to [comply with a European equivalent]. “There would be no additional burden other than coding the account as UK, Spanish or German, as opposed to a US investor. “There may be some additional costs but these would not be overwhelming.” Last year the head of BNP Paribas’ investment solutions division said the cost of compliance with Fatca would reach €100m. This article first appeared in Ignites Europe, an FT publication Continue reading →