Isle of Man Plans to End Secret Interest Payments
By LAURENCE NORMAN and ANDREA THOMAS
As governments stepped up their battle against bank secrecy, the U.K. crown dependency the Isle of Man said it will sign up to the European Union's automatic tax-information exchange accords.
The move puts the Isle of Man, which is a self-governing dependency in the Irish Sea, "at the forefront of international tax cooperation and transparency," the government said in a statement.
The announcement came as finance ministers from 18 countries meeting in Berlin agreed that individual countries can apply sanctions against nations that don't comply with transparency standards on tax-information sharing set up by the Organization for Economic Cooperation and Development.
"We have succeeded to agree on a communique which has remarkable content in our joint aim to fight tax fraud and tax evasion," German Finance Minister Peer Steinbrück said after a meeting of officials from European Union and OECD countries.
France, Germany and the U.K. have led a fight against tax havens over the past months. In April, the Group of 20 industrial and developing nations approved a three-tier list, categorizing financial centers according to their degree of cooperation with the OECD tax standards.
The Isle of Man, one of the smaller tax havens, already complies with OECD rules. Larger havens, including Switzerland, Austria and the Cayman Islands, were among those that haven't complied with those rules.
The Isle of Man's latest move will put it in compliance with stricter EU rules and could raise the pressure on others to follow suit. The government said that beginning July 1, 2011, all savings income will be automatically reported. Under current rules, if a foreign resident receives an interest payment from an Isle of Man bank account, that person has the option of blocking Isle of Man authorities from sharing that information. In return, they must pay a withholding tax.
U.K. Financial Secretary to the Treasury Stephen Timms said governments must agree how much time to give tax havens to comply with OECD rules. "It's quite important that we coordinate this," he added.
A meeting of G-20 finance ministers in November will be "an opportunity to take stock on progress, and I'm sure there will be discussion then about how much time, if more is needed ... is appropriate."
The Isle of Man's announcement came as the U.S. Justice Department denied a report in the New York Times that the U.S. would drop a case against UBS involving Americans who are suspected of dodging taxes. The Internal Revenue Service has demanded details on 52,000 account holders. The case is scheduled to go to trial in Miami on July 13.
UBS has said that turning over such confidential data would essentially violate Swiss securities law. In a separate case involving undisclosed bank accounts held by Americans, the bank earlier this year paid $780 million in a deferred prosecution earlier this year and handed over data on 250 clients to avert an indictment
Contents of the double-taxation pact, reached last week, haven't been made public.
—Katharina Bart contributed to this article.
Write to Laurence Norman at firstname.lastname@example.org
and Andrea Thomas at email@example.com